October 2020 National Economic Outlook

Executive Summary

In the last employment report before the November election, the U.S. economy added 661,000 jobs in September, according to a survey of employers. Job growth remains solid as the economy continues to recover from the Viral Recession, but the pace of job gains has steadily slowed since June. 

Job growth in August was revised higher by about 100,000 to 1.489 million, while July job growth was revised slightly lower to 1.761 million. After losing 22.2 million jobs in March and April, the U.S. has added back 11.4 million, or just over one-half of those lost.

The unemployment rate fell to 7.9 percent in September, from 8.4 percent in August and a peak of 14.7 percent in April. But the rate of decline in the unemployment rate has also been slowing. And the drop in the unemployment rate in September came for the wrong reason, largely from an exodus of discouraged workers from the job market. 

Almost 700,000 people dropped out of the labor force in September. The labor force participation rate, the share of adults either working or looking for work, fell to 61.4 percent in September from 61.7 percent in August, a worrisome sign. 

In particular, the labor force participation rate for women fell sharply from 56.1 percent in August to 55.6 percent in September, likely due to childcare difficulties; the corresponding rate for men fell by only 0.1 percentage point over the month. A permanent reduction in women’s labor force participation because of the pandemic would be a significant drag on long-run economic growth.

Housing starts rose 1.9 percent in September to 1.415 million at a seasonally-adjusted annualized rate, including an 8.5 percent increase in single-family starts, to 1.108 million. New residential construction permits rose 5.2 percent in September to 1.533 million; this is the highest level of permits since early 2007, when the housing boom was turning into the housing bust. Single-family permits rose almost 8 percent over the month. 

Homebuilding is leading the nascent recovery from the Viral Recession. Starts and permits plummeted in the late winter and early spring as the pandemic shuttered construction sites, but have since rebounded sharply as homebuilding has resumed. Permits, which are a leading indicator of residential construction, are at their highest levels in more than a decade, with single-family permits showing particular strength.

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