Jobs – Where Do We Stand Now?

Two key issues in the upcoming election are jobs and the economy. Given their importance, it is appropriate to review exactly where we are on these issues. Both the economy and the job situation have been radically impacted by the COVID-19 pandemic. In the first quarter of 2020, real GDP declined at an annual rate of -5 %, largely as a result of the first surge of COVID cases in March, when the pandemic began to have a real impact on economic activity. Corporate profits declined by $37.5 billion, and the first round of job losses – over 1.3 million – occurred in March. The decline in the second-quarter GDP of -31.4 % was even more dramatic and was accompanied by a drop in the PCE price index to 1.6% and by the loss of 20.8 million jobs in April. Rounding out the third quarter, only 7.5 million of those job losses were reversed in May and June, and only another 3.9 million were recovered in the third quarter, indicating that the virus continued to impact activity in the third quarter.

Providing further data to consider, Federal Reserve banks have started to produce what are call nowcasts, or running estimates of GDP and other economic statistics. One of the most well-known is produced by the Federal Reserve Bank of Atlanta, and the forecast of the annualized decline in GDP growth in Q3 was -35.2%, as of October 9. It is worth noting that in June the Bank predicted a decline of -51.8%, substantially larger than what occurred; so, like all forecasts, nowcasts are subject to error and sometimes huge errors. The New York Fed also now produces a nowcast of GDP growth, and its nowcast is a decline of -14% on an annualized basis (less than half the decline predicted in Atlanta’s forecast) for Q3 and -4.8% for Q4, suggesting that a significant slowdown will persist for the remainder of the year. The NY Fed’s number seems more reasonable at this point and may be too high for Q4, given the recent announcement of layoffs by airlines and by Disney and other companies in the hospitality business.

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Disclaimer: The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ ...

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