Setbacks in the US quest to reopen the economy and a deadlock in Congress have cast uncertainty on the labor market ahead of a key government jobs report Friday.

The world's largest economy has unraveled in recent months amid a terrifying Covid-19 outbreak that caused more than 186,000 deaths and tens of millions of layoffs as businesses shut down to stop the spread of the virus.

Without new stimulus from Congress that many say is sorely needed, and faced with continued high rate of layoffs, analysts are split as to what to expect when the Labor Department releases its August unemployment rate and hiring totals on Friday.

The July report showed firms added 1.8 million nonfarm jobs, and the unemployment rate dipped to 10.2 percent, and while the jobless rate is expected to continue to decline in August -- the magnitude of the drop depends on how you read the hazy data coming from an economy facing its worst downturn in a generation.

Mickey Levy of Berenberg Capital Markets told AFP he expected a surprisingly good report with as many as 1.6 million jobs added, pointing to the declining numbers of people filing new claims for unemployment benefits each week.

He also noted "other economic indicators like retail sales and durable goods orders (that) have continued to improve despite the dampening impact of the second wave of the pandemic."

However, Ian Shepherdson of Pantheon Macroeconomics said in a research note he only projects a gain of 750,000 new jobs based on surveys showing unremarkable hiring in August in both the public and private sectors.

"The key point here is that momentum in employment growth has slowed substantially, and the early signs for September are deeply discouraging," he said.

Schools have only partially reopened or shifted to online learning in many parts of the United States, raising fears women could be pushed out of the labor force
Schools have only partially reopened or shifted to online learning in many parts of the United States, raising fears women could be pushed out of the labor force AFP / Angela Weiss

Tens of millions of jobs were lost and the US saw unemployment spike to 14.7 percent in April as business shutdowns took their toll on the economy, climbing from a historically low rate before the pandemic hit. And a report Thursday said job cuts through August already surpassed the previous full-year record.

But despite fears the rate would climb even higher, it has declined in recent months as state and local governments tried to get businesses open again, even as the virus outbreak in the country became the worst in the world.

Analysts credit the $2.2 trillion CARES Act spending package that Congress approved in late March which supported consumption by giving jobless people an extra $600 per week, while also providing loans and grants to keep small businesses afloat.

But those provisions expired at the end of July, and lawmakers in Washington have failed to reach a deal to extend them despite lengthy negotiations.

A report Thursday said job cuts through August already surpassed the previous full-year record, with airlines especially hard hit, while the Labor Department has reported an average of more than one million new claims for jobless benefits filed each week in August.

William Spriggs, chief economist of the AFL-CIO union federation, told AFP that points to a weak monthly report. He predicted little movement in the unemployment rate in August and less than one million new jobs added, the consensus forecast for a 1.4 million surge.

"The fact that we still have all these people in the system looking for benefits just shows we have a large number of people not attaching to the labor force," he said. "We're looking at long-term unemployment as a huge issue."

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