First-time jobless claims for the final week of August came in at 881,000, exceeding analyst expectations and marking the lowest weekly total since the pandemic began.
Part of the reason for the dip is that the government changed the way it accounts for seasonal fluctuation in the labor market. The adjustment is supposed to yield more accurate data in the long run, but it also diminishes the significance of the weekly drop in the numbers released by the Department of Labor.
Although President Donald Trump has boasted on Twitter of soaring job gains within the past three months, economists say this ignores the inescapable fact that the economy is still nearly 13 million jobs shy of where the country was in February — and the mom-and-pop businesses that are America’s primary engine of job growth are losing ground.
“The fact remains that these are extremely elevated numbers and that we have to brace for further job loss in the coming weeks and months,” said Mark Hamrick, senior economic analyst at Bankrate.com.
“Small businesses represent 65 percent of all new jobs created,” said Eric Groves, co-founder and CEO of business-to-business technology firm Alignable, which uncovered a new — and alarming — trend in small business sentiment: Owners anticipate more layoffs.
Alignable surveyed more than 4,000 business owners and found that they had regained an average of a little over 80 percent of their pre-pandemic head count by August, but expected that to drop to 70 percent within the next 30 days.
“For the first time since July, when we started covering the recovery, we saw their outlook decline. We’ve seen it flat before, but I’ve never seen it come down,” Groves said.
“I would be really scared to bring anybody back,” said Tina Lyons, owner of a commodities freight transportation company in Portland, Oregon. “I’ll just put my head down and take it for a while — I’ll just do the work myself. Things are so uncertain.”
“I would be really scared to bring anybody back. I’ll just put my head down and take it for a while — I’ll just do the work myself. Things are so uncertain.”
After business plummeted by 80 percent in March and April, Lyons had to lay off one of her four employees in June. Although she said demand now has stabilized enough that she can cover payroll costs for the time being, she described her business as merely “limping along” — a victim first of trade disputes, then the pandemic. “Last year was so bad because of the tariffs. We kind of have a double hit in our industry,” she said.
Government data released Wednesday of the July labor market in nearly 400 metro areas was equally sobering: El Centro, California, had the highest unemployment rate in the nation at 26.8 percent. Yuma, Arizona and Atlantic City, New Jersey, were not far behind with roughly 25 percent and 24 percent jobless rates, respectively.
“You think about something touching nearly 27 percent, that’s Depression-era,” Hamrick said.
In total, 116 metro areas have higher unemployment than the national average of 10.2 percent. Greater Los Angeles has a nearly 17 percent unemployment rate, and the New York City metro area is not far behind at just over 16 percent.
“They’re now running on fumes,” Hamrick said.
As many economists predicted, the exhaustion of funds from the government’s Paycheck Protection Program is rapidly bringing Main Street to an inflection point. A recent survey by small-business trade group the National Federation of Independent Business found that 84 percent of PPP recipients said they have none of that money left, an increase of 13 percentage points in a single month. More than one in five estimated that, absent an economic turnaround or another government lifeline, they will have to close their doors within six months.
In total, 116 metro areas have higher unemployment than the national average of 10.2 percent.
“My sales have been consistently down 40 percent since April,” said Deborah Field, owner of a specialty print and design store in Phoenix.
Field received a PPP loan that allowed her to rehire the two employees she had to lay off in May, but with little demand for everything from business cards to wedding invitations, she had no choice but to let those workers go again once the funds were spent.
“[I] had to lay off again because sales have not come back,” she said. “We still need help.”
Weak August private-sector jobs data from payroll processor ADP further underscored the worrying trend of small business weakness. The month’s job gains of 428,000 — less than half the 1 million expected by analysts — were heavily concentrated at the largest firms. Businesses with 1,000 or more employees comprised 270,000 of the new jobs. Businesses with fewer than 20 employees added just 43,000.
“In many ways, small business faces the highest degree of risk as this downturn persists,” Hamrick said. “Smaller companies tend to manage with less cash on hand,” he said, and many simply have no wiggle room left. “There’s no path to success for those companies right now if they’re not able to recapture their customers.”
“We had seven employees in March and laid everyone off in April,” said Canden Arciniega, who owns a Washington, D.C.-based tour company that lost nearly all of its bookings in the early days of the pandemic.
Like many business owners, the depth and the duration of the travel bans and business closures have prevented Arciniega from being able to bounce back. “We were able to get a PPP loan but that only lasted eight weeks, and we’ve since had to lay everyone off again,” she said, adding that business is still barely a trickle compared to before the pandemic and that she worries what the future holds.
“We’re struggling as a company, our guides are struggling and I’m struggling,” she said. “I check the news daily waiting for Congress to return and help us… I’m drowning and naively waiting for the government to help — with anything.”