US jobs crisis weighs on Trump's re-election bid
“Donald Trump is the jobs president,” declares one campaign ad rolled out ahead of the first election debate tonight.
Away from the ad’s rousing music and images of whirring factories, the “jobs president” is in fact fighting an unemployment crisis damaging his re-election bid.
Trump was voted in on the promise to take back jobs moved offshore to the likes of China and Mexico but the US has instead suffered unprecedented layoffs in 2020. In a matter of months the unemployment rate went from a 50-year low to the highest since the Great Depression. How did Trump’s jobs boom go bust?
Prior to Covid-19, the president had data to back up his jobs boasts. Trump largely maintained the robust pace of jobs growth seen during the final years of the Obama presidency with unemployment slipping to a low of 3.5pc. A decade of gains were wiped out in just a few months when coronavirus struck, however.
The US and Europe took very different approaches to the jobs market during the pandemic. While European governments offered wage support to keep workers in jobs through furlough schemes, the US largely let nature take its course and instead boosted unemployment benefits to protect incomes. Benefits were lifted by an extra $600 per week but a recent Congress standoff means that support has now expired.
With no Europe-style furlough scheme to save jobs, unemployment soared to 15pc in April but has been steadily declining since. While the president can point to the jobless rate falling rapidly to 8.4pc by August, economists expect the turnaround to stall on Friday.
“The labour market has reversed half of the jobs lost in March and April,” explains Andrew Hunter, US economist at Capital Economics.
“That still leaves around 11 million jobs and all the signs are that it will take quite a bit longer to fully recover the rest.”
Forecasters believe this week's final jobs report before the election will reveal that unemployment only edged down to 8.2pc in September amid signs that firms are making cuts again. That will leave Trump facing levels of unemployment last seen during the financial crisis aftermath just before election day.
Weekly data tracking the number of Americans filing new claims for unemployment benefits stubbornly remains at almost 900,000 and even ticked up again last week. Live data from employee scheduling platform Homebase also suggests that jobs growth has stalled in recent weeks amid fears another Covid wave could see unemployment climb again.
The latest rise in unemployment claims “was a reminder of how fragile the situation is in the US”, says Gilles Moëc, chief economist at AXA.
He says recent figures look “great” compared to the near 7m losing their jobs in a week in late March but “are still significantly higher than where they were at the worst of the last recession in 2009”. Last week initial jobless claims were at 870,000, still well above the pre-pandemic record high.
Economists warn a full recovery in the US jobs market will take years, well beyond the current election battle.
“The labour market is probably going to lag a bit behind the rest of the economy,” Hunter explains.
He notes that the recovery could be slowed by the pandemic hitting labour intensive sectors hardest, such as retail and hospitality.
“There is still this ongoing damage, people permanently losing their jobs, firms going out of business and of course a number of services sectors that are suffering from social distancing requirements.”
Even with race and healthcare issues coming to the fore ahead of the 2020 election, polling suggests voters still put the economy as their top issue. The jobs recovery is running out of steam ahead of polling day and unemployment remains above the national average in Pennsylvania, Ohio and Michigan, three of the states earmarked as key election battlegrounds.
Trump promised to be the “greatest jobs president that God ever created” but the 2020 unemployment crisis could prove to be his downfall.
