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Economy added 638,000 jobs in October vs. 530,000 expected, unemployment rate falls to 6.9 percent

by Leticia Miranda - NBC News - 11/09/2020
"The latest monthly employment snapshot still underscores the challenges the next administration faces in rebuilding the labor market."
The U.S. economy added 638,000 jobs in October, far more than the 530,000 that analysts predicted, but still an indication of the challenges the next president faces in rebuilding the labor market.

The unemployment rate fell to 6.9 percent, from 7.9 percent, according to data released Friday by the Bureau of Labor Statistics. Overall, the country has replaced about half of the 22 million jobs lost in the spring from the coronavirus pandemic.

The sluggish hiring comes as the country faces record daily coronavirus infection rates that threaten to slow economic activity, with the U.S. logging 120,000 cases in one day.

In a statement after its latest monetary policymaking meeting on Thursday, the Federal Reserve reiterated that "the ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term."

The October lift in job gains includes rehiring in the auto and manufacturing sector and seasonal hiring in retail as companies prepare for an unprecedented holiday shopping season. But the nature of this holiday season’s retail jobs has fundamentally shifted from filling in-store positions to warehouse and online fulfillment roles as consumers skip the mall for online shopping.

“Online retail has kept some market share and they don't need quite as many people in retail,” said Brian Rose, senior economist with UBS Financial Services. “This could be a permanent effect as more shopping is done online and fewer people are needed working in retail.”

Over the last month, retailers have begun to fill their ranks with seasonal workers to meet online shopping demand in an effort to end the year on a high note. But so far, seasonal hires total just 378,200, about a 35 percent drop from last year, according to Challenger, Gray & Christmas, a career and job outplacement firm.

“Consumers are still anxious to go into stores because they’re worried about their health and safety,” said Jack Kleinhenz, chief economist with the National Retail Federation, a retail industry trade group.

Old Navy, Kohl’s and Macy’s have expanded buying options for shoppers, including ordering online and picking up in stores. Over the last few years, retailers have morphed their backrooms into mini-fulfillment centers where floor workers help to gather online orders for shipping. Gap told investors last month that it is permanently closing some stores and flipping others into e-commerce warehouses.

Seasonal holiday job postings that include the term “warehouse” have increased from 1 percent last year to more than 33 percent this year, according to Julia Pollak, an economist with ZipRecruiter.

“A lot of it is Amazon but even other retailers — Nordstrom, Gap,” she said. “There is a massive shift in roles.”

Online shopping this holiday season is expected to grow from last year by 33 percent, to $189 billion, according to Adobe Analytics data — and if consumers receive another round of stimulus checks, they could spend an additional $11 billion online.

However, with a fraught political landscape that threatens consumer confidence, it is unclear if retailers will end the year in the black. Millions of out-of-work Americans remain without the crucial lifeline of $600 a week in additional unemployment benefits that kept them afloat until it expired in July, and many are burning through their savings.

There are signs that the economy is slowly digging itself out of a deep recession, but certain sectors remain more vulnerable to pandemic risks, several economists told NBC News.

“We will see smaller improvements in those industries going forward, but we will see job gains [overall], because the economy is slowly healing from the job crisis in late winter and early spring,” said Gus Faucher, chief economist of the PNC Financial Services Group.
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