An applicant entered a job fair in Tampa, Fla., last month. The September report on the U.S. labor market is the final one before the presidential election.
Photo: Scott Keeler/Zuma Press
U.S. hiring gains slowed to 661,000 in September, suggesting labor-market improvements from the coronavirus downturn are moderating. The unemployment rate fell to 7.9%.
The economy has now recovered 11.4 million of the 22 million jobs lost in March in April at the beginning of the pandemic, the Labor Department said Friday. Job growth, though, is cooling, and September marked the first month since April that net hiring was below 1 million.
Unemployment is now in line with previous recessions and remains well above levels seen before the pandemic. The jobless rate stood at 3.5% in February, a half-century low, just ahead of the coronavirus crisis.
Large payroll gains occurred in the leisure-and-hospitality, retail and health-care sectors, some of the hardest hit at the onset of the pandemic. Government jobs declined in September, mainly at public schools.
Friday’s Labor Department report is the final jobs report before the presidential election. President Trump and Democratic presidential candidate Joe Bidenhave promised to create millions of jobs since the pandemic shocked the U.S. labor market this spring.
Employers continue to bring back workers, and the labor market has regained jobs faster than many economists projected, but some factors are hindering economic momentum. For one, the initial hiring rebound from business reopenings is easing as states lift restrictions at a slower pace than earlier in the summer. Further, layoffs and the resulting claims for unemployment compensation have remained elevated compared with pre-pandemic peaks, though they are down from highs reached earlier in the crisis.
“Unfortunately, the layoffs don’t seem to be slowing down, so you’re running up against a really persistent negative drag,” said Marianne Wanamaker, a labor economist at the University of Tennessee, Knoxville. “It’s really hard to hire that fast to recover everything you’re losing.”
Other economic readings such as consumer spending and manufacturing output show the recovery is continuing, but at a slower pace. A late summer drop in household income is an additional factor weighing on the recovery.
Andrew Fritz, co-owner of Citizen Public House restaurant in Scottsdale, Ariz., voluntarily reduced his dining room hours and capacity in July as new coronavirus cases in the state spiked. He increased those hours and rehired workers about a month later, but said the restaurant is still operating with less than half of its pre-pandemic staff. Sales over the past two months have fluctuated around half the levels seen a year earlier.
Mr. Fritz said demand has been strong on the weekends. During the week, he added, business has been much weaker and more customers are ordering carryout meals, which tend to have a lower sales value.
“We’re shedding money every week,” Mr. Fritz said. He expects the restaurant could break even if revenue rose by another $5,000 to $10,000 a week. “But a break-even scenario is a really ugly scenario, because we’re doing it by cutting peoples’ salaries and wages and hours.”
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Large corporate layoffs are sweeping across the U.S. Walt Disney Co. earlier this week announced permanent layoffs for 28,000 theme park workers who were previously on temporary furlough. American Airlines Group Inc. and United Airlines Holdings Inc. will proceed for now with a total of more than 32,000 job cuts Thursday after lawmakers were unable to agree on a broad coronavirus-relief package. Those layoffs won’t be reflected in Friday’s employment data.
Layoffs occurring today reflect a shift in employers’ mentality from the beginning of the crisis. Companies that were holding on to workers are now facing the reality that revenues are weaker than they previously imagined, said Ms. Wanamaker.
“There’s no sense that a layoff under those circumstances would be temporary,” Ms. Wanamaker said. “It’s a ‘facing-reality’ sort of layoff.”
Sectors that were among the hardest hit at the start of the pandemic—including leisure and hospitality and retail—have been some of the quickest to recover jobs, though the pace of gains has slowed in recent months.
E.D. Mondainé, owner of Po’Shines Cafe De La Soul in Portland, Ore., had to furlough half his staff earlier this spring when the coronavirus hit.
The soul-food restaurant and catering company was able to bring its employee count back up this summer, thanks in part to a grant from humanitarian aid organization Mercy Corps. Mr. Mondainé said the neighborhood restaurant also gave out thousands of free meals like catfish and eggplant Parmesan during the pandemic, building awareness of its business in the community and, in turn, boosting revenue down the road.
Still, consumer caution toward the virus is keeping a lid on sales, which remain down about 30% compared with pre-coronavirus, Mr. Mondainé said. He plans to keep payrolls steady until revenue improves further.
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“This isn’t going to last forever,” he said of the pandemic. “As long as we’re able to keep our heads above water, we’ll be there when it does end.”
Austin Halliday of Cleveland, Tenn., was laid off from his consulting role at a data-analytics company in June after nearly a year on the job. When he first became unemployed, Mr. Halliday said he was optimistic about quickly finding a new position. He later realized the labor market was crowded with many other people seeking employment.
Mr. Halliday has submitted 250 job applications since June, some for entry-level roles and others for positions requiring more experience. He has had a few interviews but doesn’t yet have a job. The 23-year-old is collecting unemployment benefits as he lives at home with his family and hunts for work.
“Sometimes I am very motivated and thinking, ‘yeah, I can find a job somewhat soon,’” he said. “And then other times, it’s like, ‘why am I doing this?’”
—Kim Mackrael contributed to this article.
Write to Sarah Chaney at sarah.chaney@wsj.com
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