September jobs report indicates large, unexpected decline, according to Ball State economist

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MUNCIE, Ind. — The Employment Situation Summary for September had reported 194,000 jobs gained, yet a large decline in labor force participation. According to Michael Hicks, director of the Center for Business and Economic Research at Ball State University, it’s “far lower” than what models had predicted, and suggests the COVID-19 pandemic “continues to slow economic performance across the nation.”

Hoosiers comprise only about two percent of the U.S. labor market, yet according to Hicks, they’ve been underperforming in job growth.

“We’ll probably be very much how we are now for many months,” Hicks said. “We should not expect the challenges to heal overnight, this will take many months, or a year, while recovering. We’re not going to see the big surge that we’re going to see during the holidays, and we won’t see the big spending for Christmas. It’ll be big, but not to the extent employers want.”

Based on the data presented in the job report, Hicks was able to find a lot of glaring issues. One example showed how labor losses (296,000) were effectively composed entirely of women, and job losses were clustered in educational services and in healthcare.

“This is evidence that continued child care responsibilities are keeping many women out of the labor force,” Hicks said. “If COVID drops precipitously, if we can get more people and children vaccinated, that can ensure a much more rapid recovery, but it’s not going to be for another few months. Until we know kids are vaccinated, until those days are with us, we’re not going to see a big boost of folks back in the labor force.”

Hicks also explained that it should now be clear that ending Pandemic Unemployment benefits wasn’t a fit solution for employers.

“There’s no magic bullet that’s going to supply workers. This is a permanent shock,” Hicks said. “It’s going to be reasonably difficult for businesses to continue to hire the way they did before the pandemic without sharp wage increases.”

In the report, 36 percent of all unemployed workers had come from jobs in retail, wholesale, hospitality and tourism. According to Hicks, people are more reluctant to go to hotels and restaurants, eating out less and heading out to recreational activities to a lesser degree. As for wholesale, a loss in manufacturing jobs is linked to COVID in other countries, which leads factories to be unable to distribute parts.

“All of those things add up to a more difficult time keeping assembly lines open and getting parts delivered and it leads to fewer sales. All these together, you have an economy that’s growing, yes, but at a far slower rate,” Hicks said. “Today’s available labor is close to 5.5 million workers fewer than we would’ve expected without the pandemic. That, along with slowing demand is what is causing or moribund job growth at this point of the recovery.”

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