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Jobs report shows U.S. economy is recovering at a 'worrisome' pace: Economist

The U.S. economy added 661,000 jobs in the month of September. KPMG Chief Economist Constance Hunter joins the On the Move panel to discuss.

Video Transcript

JULIE HYMAN: Let's dig a little bit more into the details of the jobs report now. We're joined by Constance Hunter. She is KPMG Chief Economist. She is joining us from New York.

Constance, I'm not sure if you heard Joe's full-- Joe LaVorgna's full assessment there at the beginning of the program. But he characterized this as a strong jobs report and a strong job market. What's your take on sort of-- give us your overall take to start with.

Constance, you're just muted. So you just need to unmute yourself. So again, just to give the numbers while Constance is working on that, 661,000 jobs added. The economist survey was about 859,000. Constance, please.

CONSTANCE HUNTER: Hi, sorry about that. My team is laughing if they're watching this, because I do this all the time on our internal meetings as well.

In any case, strong is not the first word that I would use. I would say that it's great that we added 661,000 jobs. But that is a slowing pace. It is worrisome, because that momentum is expected to continue to slow into the end of the year, especially if we do not have additional stimulus for the most impacted parts of the economy.

The risk is that the firewall that we built around the COVID-impacted parts of the economy begins to break down and hurt not just those areas of the economy, but that it bleeds over into other parts of the economy. So shoring up that firewall is a really important thing. And this jobs report shows that that firewall is beginning to break down.

JULIE HYMAN: Just one second, Constance. I just want to let everybody know that Joe Biden has tested negative for COVID-19. That's according to an MSNBC reporter. Again, there was the reports earlier today that Biden was getting tested for coronavirus, given his potential exposure. He was in, of course, the same room with President Trump on Tuesday for the debate. But again, an MSNBC reporter is now saying that Biden has tested negative for COVID-19. Adam?

ADAM SHAPIRO: Constance, welcome back. It's good to see you. I'm curious if there was anything that stood out in the jobs report to you, whether it be negative or positive. I've been harping a lot today on that permanent job loss number, because we were advised to pay attention to that. Were we misadvised? Or is there something else you're paying attention to?

CONSTANCE HUNTER: No, that's an important feature of this recession. Although, it's very, very different than a normal recession. Normally, the permanent job losses start out very high, and they gradually decline. And the amount of temporary job losses grows into a recession.

We've seen exactly the opposite in this situation. We had a high number of permanent job losses. Almost 90% of that initial report in April were temporary job losses. And we've increasingly seen those turn to permanent job losses.

But that is something we would expect, because COVID has gone on longer, I think, than the initial estimates that we had in, say, March and April. And as firms have had to face the reality of ongoing challenges, they've had to convert some of those job losses over to permanent job losses.

So it really speaks to the reality on the ground. One of the indicators I look at all the time is the diffusion index. And here, I do think we have a piece of good news. The diffusion index is high. It shows over 65% of employers are adding jobs. And so that is a very, very good sign. The recovery in jobs was broad-based, even though it slowed in September.

I think the real question, though, is, what does this jobs report tell us about how the economy is gonna unfold in the fourth quarter? And what it [? prestages ?] to me is a much slower pace of recovery. And that is where the concern comes in.

EMILY MCCORMICK: Constance, this is Emily. Kind of leaping off on that point, one of the things I've been thinking about is what's not included in this September jobs report. And those are some of the corporate layoff announcements we've had over the past week or so. Just between Disney and the airlines, we have tens of thousands of job losses coming.

With that in mind, what's your expectation heading into October? Of course, this being the last report we'll get before the election. But what are you seeing for the coming month?

CONSTANCE HUNTER: Yeah, so we also look, for example, at the Homebase data, which has been very, very helpful in determining service sector jobs. And there, we're looking at a slight decline in jobs in October. So we're gonna continue to triangulate and look at both the official data and some of this high-frequency data that can give us a real time read on what's going on jobs wise.

And of course, remember, the headlines about the job losses are sad and tragic. But what maybe doesn't get as much traction is the headlines about all the jobs being added. So for example, LinkedIn had a story the other day about all the firms that are adding jobs. And when I added up all those jobs, it came out to be just shy of a million jobs.

So we'll need to see what the net result is. Certainly, there are firms like Lowe's, Home Depot, Amazon, a bunch of companies where we're adding jobs. Because certain parts of the economy are actually doing well, as people are shifting their consumption to things that make their experience of being at home better. Sort of what I call the FOGO, Fear of Going Out, economy.

The problem is, is that switch is not big enough to overwhelm the losses that we're seeing in the FOMO economy, the Fear of Missing Out economy. Things like going to restaurants, baseball games, concerts, that sort of thing.

RICK NEWMAN: Hey, Constance. Rick Newman here. What will it take to go from a decelerating pace of job growth to an accelerating pace of job growth? And when might that happen?

CONSTANCE HUNTER: So I think it would take the virus-- slaying the virus, right? So whether that means a vaccine. Whether that means widespread precautions, like mask-wearing, handwashing, social distancing, really eradicating the spread of the virus. All of those things together can help reduce the virus. And when we slay the virus, then we will see probably a rebound in economic growth.

The fear, of course, is that the longer that time goes by where we don't get a handle on the virus, the more economic damage. And like I said earlier, the firewall we built around the really severely COVID-impacted parts of the economy was good. It's starting to erode. And without that firewall being shored up with additional assistance, the fear is that this starts to bleed out into the broader economy.

And that has longer-lasting scarring effects. It makes it harder to recover from the recession. And it starts to impact families in a longer-term way. Impacting their wealth. Impacting their credit scores. So we do have areas for concern, the longer we go without slaying the virus.

JULIE HYMAN: Constance Hunter, KPMG Chief Economist, thank you so much. Really appreciate it, Constance.