Zillow Market Pulse: November 6, 2020

November 6, 2020

The U.S. labor market improved in October from September, and unlike the month before, appeared to do so for the right reasons. But problems persist: measures of persistent job loss remain elevated and more than half the jobs lost in the Spring have not been recovered.

The job market continued its gradual recovery in October…

• The U.S. economy added 638,000 jobs in October.
• The headline unemployment rate fell to 6.9%, down a full percentage point from September.

…But, like before, signs of stress persist…

• A third of all people unemployed but in the labor force have been jobless for at least 27 weeks.
• Alternative measures of persistent unemployment have barely improved and remain near pandemic highs.

…And the path forward remains uncertain.

• The labor market is still down almost 12 million jobs from where it would be had the pandemic not occurred.
•  55% of the jobs lost in March and April have not returned.

So what? 

The October jobs report offered both encouraging and discouraging signals for the U.S. labor market. The U.S. economy added 638,000 jobs in October from September, a figure that would have been larger without the removal of about 150,000 temporary Census jobs. The headline unemployment rate dropped a full percentage point, to 6.9%, and unlike September's report, the decline in overall unemployment appears to have occurred for healthy reasons. Both the labor force participation rate and the share of people who are employed both increased from September, as did the overall size of the labor force. All three of these metrics remain well below their pre-pandemic levels, but after September's weak showing, October's improvements could indicate that people are gaining confidence in their ability to find employment.

But it's critical not to overlook signs of weakness, too — particularly the fact that joblessness is becoming increasingly permanent. While temporary job losses declined, continuing a trend that has been playing out for months, measures of persistent or permanent unemployment barely improved in September and remain near their highest pandemic-era levels. There were 3.6 million "long-term" unemployed people — those out of work for 27 weeks or longer – in October, up about 46% from September and representing 33% of all people currently unemployed but still in the labor force. Given the still-elevated level of jobless claims and ongoing spread of the coronavirus, an increase in this metric isn't a surprise, but it also reinforces a key challenge that the labor force will face going forward. Generally, the longer people are out of work, the harder it is for them to reconnect with their old employer and, more broadly, to find work even when jobs become available.

As expected, job growth has slowed markedly in the past few months and more than half (55%) of the jobs lost in March and April have failed to return. Assuming the same level of job growth as before the pandemic had continued, estimates suggest that the labor market is still down about 11.7 million jobs compared to where it would have been had the pandemic not occurred. What's more, the report fails to account for the 7 million workers who remain employed but have seen their hours or wages cut in recent months. Meanwhile, jobless claims remain elevated – more than a million people filed for initial jobless claims last week. The outlook for the job market depends most of all on the path of the coronavirus and the potential for additional federal, fiscal relief. Today's report showed that state and local governments — suffering huge losses in revenues because of the pandemic — cut 130,000 jobs in October, and will continue to contract without additional relief.

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