Job creation in the US improved in recent months, but a full recovery likely won’t happen until the COVID-19 pandemic is under control and a safe and workable vaccine is widely available, according to Boston Federal Reserve President Eric Rosengren.
The US Department of Labor reported in September of 2020 that around 1.4 million additional jobs were created in August, pushing the unemployment rate down to 8.4 percent from a high of nearly 15 percent in April.
Despite the significant improvement, however, Rosengren warned that the US is still in a “very significant recession” and that there is still a long way to go before the country sees a completely normalized market.
Rosengren also said that the retail and hospitality sectors, which were hard-hit by the pandemic due to government-imposed restrictions, saw significant gains in recent months, but both sectors still have a long way to go before returning to pre-COVID levels.
Meanwhile, credit rating agency Fitch Ratings pointed out that employment remains suppressed in several states: Alaska, Hawaii, Illinois, Kentucky, Nevada, New Jersey, and New York. The New York City-based firm said these states saw the biggest drop in employment during the first three months of the pandemic and have seen a slower recovery in recent months.
In addition to the leisure and hospitality industries, other sectors that saw significant job losses between February and July of 2020 include education and health, professional and business services, state and local government, trade, and transportation and utilities, representing 10 to 12 percent of job cuts during this period. Fitch warned that further layoffs in the public and private sectors are to be expected the longer it takes to get COVID-19 under control.
To help boost recovery, the Federal Reserve implemented various lending and liquidity programs and anchored short-term interest rates close to zero. Fed officials also rolled out a revised policy that will keep rates low until the unemployment rate falls below the present levels.
Some market participants also believe the Fed will be introducing specific metrics to be achieved before it can raise rates, but Rosengren said that this is unlikely in the near future.