President Biden may soon receive some much-needed good news.
The jobs report, due out Friday, will likely show strong employment gains for the month of October, giving the ailing White House a shot in the arm. After the drubbing Biden and his Democratic colleagues took on election night, they could use a booster shot, or two, or maybe even three.
My optimism is based both on the better-than-expected ADP jobs tally released Wednesday, which was lost amid the excitement over the election results, and on the jobless claims figure posted by the Labor Department Thursday.
ADP reported that the private sector added 571,000 jobs in October, beating by a mile the consensus forecast of 395,000. The biggest gains were in hospitality, where 185,000 positions were filled, professional and business services (88,000), trade transportation and utilities (78,000) and education and health services (56,000.)
Also encouraging were the employment gains in construction (up 54,000) and manufacturing (53,000). In other words, pretty much across-the-board gains, but concentrated especially in lower-paid services sectors.
Here’s why I read this as a good omen: The gain in hospitality jobs in both October and September (199,000) suggests that the delta variant is not the only issue holding back employment growth. These are jobs considered most exposed to COVID-19 concerns. People don’t go out to eat at restaurants or stay in hotels if they’re nervous about catching a deadly virus; people don’t want to work in those places, either.
COVID cases have been declining, but the virus has not gone away. People are much more comfortable eating out, for example, than they were a year ago, but their level of caution has not changed significantly over the past few months.
We know that from tracking done by Morning Consult, which showed most recently that 70 percent of all adults in October were comfortable eating at a restaurant, one point lower than over the Fourth of July but a little above the level in September. But, in an indication of ongoing caution, there was a greater number of people preferring to eat outside, rather than inside. Bottom line: not much change overall.
I conclude that the September-October pick-up in hotel and restaurant hiring after several slow months reflects something else.
Most likely, it reflects the end of the incremental unemployment benefits that expired in early September, impacting millions of Americans. Republicans have claimed for months that the extra $300 weekly federal payments were stifling hiring by making it too easy for people to remain on the sidelines. Many of us anticipated that once those payments stopped, hiring would accelerate. That would appear to be exactly what happened in October.
An excellent study by Stephen Moore, Casey Mulligan and Erwin Antoni showed that “in all 25 states that are continuing the UI (Unemployment) bonus, a family of four can currently receive the annual equivalent of more than $82,000 in income—while not working. In 19 states and D.C., the amount is more than $100,000. In Massachusetts, it is over $147,000.”
Such payments, they argue, disincentivized work, and they are clearly right. Since during the pandemic people struggled to find child care and were nervous about becoming ill, many decided to stay home, leading to the lowest worker participation level since the 1970s.
Needless to say, it isn’t investment bankers or tech professionals or doctors who would be sidelined by extra unemployment benefits. It would be lower-income Americans who work in fields such as hospitality, where the average hourly pay for production and non-supervisory personal is $16.71, according to the Bureau of Labor Statistics.
That there was such an upturn in hiring in that field over the past two months, where, by the way, job openings have been plentiful for some time, bolsters the argument that the extra pay was a hindrance. Having to compete with the government’s largesse has driven employers to raise pay for hospitality workers by 7.6 percent over the past 12 months, a rise considerably above the national average. The increase in wages doubtless helped attract workers, too.
The most recent jobless claims also bolster the case that hiring accelerated last month. The Labor Department reported that new claims totaled 269,000 last week, the lowest since the pandemic began and better than the consensus of 275,000. Continuing claims, at just over 2.1 million, posted a COVID-era low.
All these figures point to a better-than-expected October jobs report, which may help stem sinking consumer sentiment. Higher employment could be the first volley in the war against inflation. There is little question that a shortage of truck drivers, meatpackers, longshoremen and all kinds of other workers has driven up prices.
If indeed more workers are getting off the sofa and applying for jobs, that is cheery news on all fronts.
It is especially good news for Joe Biden. The president has been buffeted by high inflation and slow hiring; in September the U.S. added only 194,000 jobs. Shades of Jimmy Carter-era stagflation haunt the White House.
Estimates for October hiring range from 525,000 (Goldman Sachs) to 650,000 (Nomura). I’m betting on the higher end of that range.
If I am right, the media will quickly abandon its hand-wringing over Democrats’ dismal Election Day results and pivot to the wonders of Bidenomics. More important, maybe those infernal supply chain bottlenecks will begin to ease.
Christmas could come early for the Biden White House, and maybe it’ll come for all Americans after all.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.