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WSJ Survey: 43% of Economists Don't See U.S. Gaining Back Lost Jobs Until 2023

By Harriet Torry and Anthony DeBarros 

The U.S. labor market faces a protracted recovery amid the continued spread of the coronavirus and uncertainty over prospects for another stimulus package and the outcome of the presidential election, according to a new Wall Street Journal survey of economists.

More than half of business and academic economists polled this month said they didn't expect the labor market to claw back until 2023 or later all the jobs lost as a result of coronavirus-related shutdowns. That is a slower timeline than economists predicted six months ago.

Hiring gains slowed sharply heading into the fall as more layoffs turned permanent, adding to signs that the economy faces a long slog to fully recover from the coronavirus pandemic.

"The slowing momentum in the labor market bodes poorly for the broader recovery and points to increasing scarring effects from the crisis," said Gregory Daco, chief U.S. economist at Oxford Economics.

The U.S. had nearly 11 million fewer jobs in September than it did in February. Nearly 4 million of the jobs lost since the start of the pandemic were in the leisure and hospitality sector, according to the Labor Department. Economists say recovery in travel and hospitality has been slower than expected earlier in the pandemic because of continued high coronavirus infection rates.

"The damage to service-sector employment will be long lasting, and many will face long durations of unemployment that will delay the return to February 2020 levels," said Joseph Brusuelas, chief economist at RSM US.

Six months ago, in The Wall Street Journal's April survey of economists, more than half of respondents expected job losses to hit a trough in the second quarter of 2020. That proved to be the case: The labor market shed a seasonally adjusted 13.3 million jobs in the second quarter, the steepest quarterly decline in records dating to 1939.

Economists in the April survey expected that on average, payrolls would recover to their February 2020 level in just over two years, by the third quarter of 2022.

In this month's survey, just over a third of economists, 34.7%, broadly stuck with that timeline and said payrolls would recover in 2022. A larger share, 42.9%, now see the labor market recovering in 2023, and another 12.2% expect it will take even longer -- with 2% expecting it will take until 2030.

Economists in this month's survey cited a number of reasons for a slower labor-market recovery, notably a potential worsening of the Covid-19 crisis as the flu season approaches with no coronavirus vaccine, a lack of fresh fiscal stimulus measures and uncertainty surrounding the election.

"If we get more aid and stimulus, we could mitigate virus-related losses and have a stronger recovery. If not, all bets are off and downside risks dominate," said Diane Swonk, chief economist at Grant Thornton.

The latest Wall Street Journal survey closed before President Trump called on Congress on Tuesday to approve some additional assistance for airlines, a small-business aid program and direct checks for many Americans. Shortly before that, he had announced a stop to talks over a relief package that Democrats and Republicans had debated for months.

Survey respondents this month viewed the coming presidential election as more fraught with uncertainty than usual. Eighty percent of economists said the current election process is introducing more uncertainty into financial markets compared with presidential elections of recent decades. Nearly three-quarters of economists, 73.2%, said it was creating more uncertainty than usual for the economy.

Most economists in this month's survey said the outlook for a recovery in gross domestic product is notably faster than for jobs. More than half of economists, 57.4%, expected that in 2021, economic output will return to the seasonally and inflation-adjusted level of its prior peak in the final quarter of 2019. A further 18.5% of economists expected GDP to recover to its previous peak by the first quarter of 2022.

"We're substituting away from labor-intensive services," said Leo Feler, a senior economist at the Anderson School of Management at the University of California, Los Angeles, who expects GDP will recover faster than employment.

Economists expected gross domestic product to contract 3.6% this year, measured from the fourth quarter of 2019. On average, they expected the economy to grow 3.7% in 2021 and 3% in 2022.

The Journal surveyed 63 economists from Oct. 2-6, though not every economist answered every question.

Write to Harriet Torry at harriet.torry@wsj.com and Anthony DeBarros at Anthony.Debarros@wsj.com

(END) Dow Jones Newswires

October 08, 2020 10:14 ET (14:14 GMT)

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