ARBOR OUTLOOK: A Main Street Economy Stuck in Neutral
A Main Street Economy Stuck in Neutral
"Are they ever gonna understand?
You can't leave a workin' man...
with nowhere to go."
"Workin' Man" as performed by The Nitty Gritty Dirt Band
That employment takes the escalator up but the elevator down is a familiar axiom regarding markets, but can easily apply to current job numbers. It took years to reach a 3.5% unemployment rate, but only a few months for unemployment to skyrocket to double-digit figures.
Small businesses, the historic driver of employment, are still suffering dramatically. Owners do not yet feel comfortable bringing back furloughed employees or hiring new ones. Many small businesses are shuttered, some permanently. A real economic recovery, one not fueled artificially by government stimulation, will occur when we get our arms around the pandemic.
The stock market is separating itself from a poorly performing economy for a couple of reasons. When a local canoe rental service falters, for example, there is no direct link to stock declines. Another reason for market gains, of course, is that the government has been providing billions in liquidity.
The jobs report from the U.S. Department of Labor, in addition to national unemployment numbers, provides statistics on employment trends in various sectors of the economy: manufacturing, health care, retail, professional and business services, construction, leisure services and hospitality and more. And it breaks down job gains or losses within those sectors.
The jobs report for July was not nearly as good as the one for June. This can probably be attributed to certain regions of the country experiencing significant increases in coronavirus cases and deaths, which has caused states to issue more restrictive business guidelines. The report reveals that in July some 1.8 million jobs were created, which is good, but not compared to the 4.8 million jobs created in June. However, the July unemployment rate did decline by 0.9%, down to 10.2% overall (There are 16.3 million unemployed Americans, down from 17.7 million in June).
Let’s consider three sectors: manufacturing, health care and construction.
Manufacturing experienced a net gain of 26,000 jobs in July. The biggest increase was in motor vehicles and parts, with a net gain of 39,000 jobs. Fabricated metal products (-11,000), machinery (-7,000) and computer and electronic products (-6,000) jobs were down a combined total of 24,000. Overall, manufacturing added 623,000 jobs in May-July, but is still down 740,000 jobs since February.
Health care has seen a decline of 797,000 jobs since February. Health care added 126,000 jobs in July. The growth was in the offices of hospitals, doctors, dentists and home health care services. Job losses continued in nursing and residential care facilities.
Construction added only 20,000 jobs. In May and June, construction enjoyed combined job gains of 619,000. Construction is down 444,000 jobs since February.
So unemployment is declining slowly. And job growth is starting and stopping, based on local economies opening and closing again as states fight the virus. Small businesses? They’re stuck in neutral, for now. Wall Street and Main Street are currently located on opposite sides of town.
Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 – www.arborwealth.net), a fiduciary, “fee-only” registered investment advisory firm located near Destin, FL. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.