US: Weakening Jobs Market Enters Critical Phase

The outlook for jobs growth in December is less positive. Rising covid cases are putting hospitals under real pressure and we are likely to see more containment measures introduced to try and keep the situation manageable. But this comes at obvious economic cost with many businesses likely to struggle with the threat of job losses.

Moreover, we have to remember that the Federal Reserve’s Beige Book found four out of 12 Fed districts were already reporting they experienced “little or no growth” in recent weeks. It suggested that “activity began to slow in early November as COVID-19 cases surged” and that business optimism had “waned” as a result. That is not an environment that suggests vigorous hiring.

Employment tracking (millions in work) & employment as % of working population

(Click on image to enlarge)

Source: Macrobond, ING

A fiscal support package looks needed more and more

Comments from Federal Reserve officials have underlined their concern about the near-term economic situation. Only on Wednesday, Dallas Fed President Robert Kaplan warned that “growth could stall out” if we see the economy constrained in the absence of fiscal support.

In that regard, we continue to look for signs of a deal on a fiscal package to help households and the broader economy through this latest wave of the pandemic. House majority leader Nancy Pelosi’s endorsement of the $908bn bipartisan fiscal plan, after having held out for a $2tr+ stimulus for so long, suggests there is a real chance of a deal being struck in the next week or so. Remember we have recess coming up and a December 11 deadline on a funding bill that could in fact lead to a partial government shutdown.

As a minimum there will be intensifying pressure to extend unemployment benefits that are scheduled to expire at month end and to find money to fund the vaccination roll out. However, Republican Senate leaders continue to sound more cautious… for now…

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