Jobs recovery is slowing, but congressional CPR not expected

The weak jobs numbers are unlikely to break the legislative impasse that’s taken hold of Capitol Hill

The economy added 1.4 million nonfarm jobs in August, bringing the unemployment rate down to 8.4 percent, the Bureau of Labor Statistics reported Friday.  (David McNew/Getty Images)
The economy added 1.4 million nonfarm jobs in August, bringing the unemployment rate down to 8.4 percent, the Bureau of Labor Statistics reported Friday. (David McNew/Getty Images)
Posted September 8, 2020 at 6:30am

The August jobs report showed America’s economic recovery slowing down, but Washington analysts doubt the figures will be enough to jostle Congress out of its deadlock over additional stimulus.

The economy added 1.4 million nonfarm jobs in August, bringing the unemployment rate down to 8.4 percent, the Bureau of Labor Statistics reported Friday. That’s less than the revised 1.7 million nonfarm jobs added in July, and the 4.8 million added in June. Economists worry that the slowing pace of job creation may smother hopes for the economy’s quick convalesce from the havoc wreaked by the coronavirus.

“The labor market recovery has slowed down a fair bit and while things are improving for some people, the hopes of a quick and complete recovery are gone,” said Nick Bunker, director of research at Indeed Hiring Lab. “Unless there is some big reversal in terms of public policy or the virus itself, we’re not going to see a sharp return to where we were before the virus.”

But congressional observers don’t expect the weak jobs numbers to break the legislative impasse that’s taken hold of Capitol Hill since June.

“I think a lot of people will still argue we’re making progress, even if it's insufficient,” said Brian Riedl, a senior fellow at the Manhattan Institute and former staffer for Sen. Rob Portman, R-Ohio. “In order to shake Congress, you’d need a disastrous job report — one where the unemployment rate is rising, or the number of jobs created is extremely low. I don’t think anything short of that is going to break the logjam in Congress."

Six months into the pandemic, economists are still struggling to understand its impact on the labor market. The coronavirus has caused record job losses, which have been followed by record job gains that, in any other year, would have been unquestionably excellent news. But this year, adding 1.4 million jobs is open to interpretation, said Ben Koltun, a senior research analyst at Beacon Policy Advisors, a research group. 

“There are just two different narratives — two different playing fields — between Democrats and Republicans right now, and it's hard to see how the jobs report goes one way or another in breaking that stalemate,” said Koltun.

The only way the deadlock will end soon will be if the economic data decisively kills one of those party’s narratives, said Jason Rosenstock, a partner at the advocacy group Thorn Run Partners.

“Both sides will claim victory with a minimal change one way or the other,” Rosenstock said. “That’s why I think it needs to be really, definitively bad.”

Rosenstock thinks some kind of relief bill could be included in a continuing resolution to keep the federal government funded through the end of the calendar year. The government’s funding runs out at the end of September.

Friday’s jobs figures were the first released since the federal government stopped paying an extra $600-a-week in extended unemployment insurance at the end of July. Economists credited those funds with softening the drop in aggregate demand and preventing the job cuts caused by the coronavirus from spreading further. As of mid-August, 29 million Americans were filing for jobless aid, 2 million more than the previous week.

President Donald Trump issued an executive order Aug. 8 allowing states to tap into $44 billion in Federal Emergency Management Agency disaster relief funds to pay out an additional $300-per-week in unemployment insurance. So far, 41 states have been approved to offer the funds, but just a handful have begun to do so.

BLS measures nonfarm payrolls and unemployment in mid-month, meaning the August jobs report only captured the two weeks after the unemployment insurance extension ended. The benefits’ drop could still be rippling out into the jobs market, said Bunker. “There’s some impact on consumption that might not be showing up yet in the jobs report,” he said.

After enacting a series of coronavirus bills totaling $3 trillion in economic relief and health spending in the spring, Congress stalled over the summer on another stimulus measure.

The Democratic-controlled House passed a $3.4 trillion bill in May that Senate Republicans have shown no interest in considering.

Pressure on Democrats

Negotiations remain deadlocked, with White House Chief of Staff Mark Meadows saying the administration was only willing to spend $1.3 trillion, while Speaker Nancy Pelosi, D-Calif., is calling for $2.2 trillion. Senate Republicans, who have let the White House negotiate for them, may consider passing a separate $500 billion measure this week.

Koltun thinks if there’s a deal to be done, it will be Democrats who blink first.

“I have a very hard time seeing Republicans come up to $2 trillion, and I think that there are enough Democrats clamoring for some sort of deal,” he said. “The farther you go on without any progress, the more antsy people get. And I think most Democratic rank-and-file would prefer a quarter of a loaf to no loaf when it comes to a deal.”

Riedl agreed.

“The fact that Republicans are willing to spend a trillion, but won't lose sleep over passing nothing, gives them a lot of leverage,” he said. “Democrats are treating these negotiations like it’s a must-pass bill and if they hold out for more, the Republicans will be forced to agree. And Republicans just aren't approaching it that way. Republicans are not approaching this as a must-pass bill.”

“If Democrats continue to ask for so much more than Republicans are willing to finance, [Senate Majority Leader] Mitch McConnell is fine spending fall confirming judges,” Riedl said, adding that some in the GOP were already afraid the $3 trillion Congress has spent in COVID-19 relief could stir a reprisal of the tea party movement that emerged in the wake of the 2008 recession.

McConnell cast doubt on passing another relief package on Wednesday. “I don't know if there will be another package in the next few weeks or not,” he said at an event in his home state of Kentucky.

While the jobs report is unlikely to unclog Congress, other negative economic data, if severe enough, might. Riedl is watching personal income levels, which actually rose as the coronavirus recession set in, thanks to the extended unemployment benefits and stimulus checks. If that falls dramatically, it might make the two parties return to the negotiating table.

Koltun is keeping his eye out for small business failures or a drop in consumer spending, which makes up about 68 percent of GDP. And, of course, Wall Street. “The stock market is obviously something that Trump watches,” he said.

That all means more waiting for economic indicators to prod Congress into action, and that’s bad for the voters they represent, said Bunker.

“Wait-and-see is not a good policy with millions out of work,” Bunker said. “Wait-and-see puts a lot of weight on month-to-month data and not a lot on the lived experience of people, and what we know is that money is needed to support households.”