Coronavirus Jobs Economy
The jobs picture got darker in July as the economic recovery slowed. Photo credit: Screenshot, Reuters video

U.S. employment growth slowed considerably in July, underscoring an urgent need for additional government aid as a resurgence of COVID-19 infections threatens the nascent economic recovery.

“The jobs recovery is on very shaky ground and without seat belts for the unemployed provided by additional fiscal stimulus the economy could be in for a very bumpy ride,” said Chris Rupkey, chief economist at MUFG in New York. “There cannot be sustainable economic growth if the country has to carry on with the crushing weight of massive unemployment.”

Nonfarm payrolls increased by 1.763 million jobs last month after a record rise of 4.791 million in June. Excluding government employment which was artificially boosted by a seasonal quirk related to local and state government education, and temporary hiring for the 2020 Census, payrolls rose by 1.462 million, down from 4.737 million in June.

Economists polled by Reuters had forecast 1.6 million jobs to be added in July. While the number exceeded expectations, the economy has regained only 9.3 million of 22 million jobs lost between February and April.

San Diego County shed jobs as the local unemployment rate hit 28% in the immediate wake of business closures as the coronavirus pandemic took hold. The rate has since fallen to about 14%, but that was before new public health orders again closed or placed limits on many local businesses.

The Labor Department’s closely watched employment report on Friday came as Democratic leaders in Congress and top aides to President Donald Trump struggled to negotiate a fiscal package.

Trump, who lags former Vice President Joe Biden, the presumptive Democratic Party nominee, in polls ahead of the Nov. 3 election, threatened to bypass Congress with an executive order.

Economists believe July was probably the last month of employment gains related to the rehiring of workers after the initial reopening of businesses.

Coronavirus infections though have soared across the country, forcing authorities in some of the worst-affected areas – like San Diego – to either shut down businesses again or pause re-openings, sending workers back home.

Due to the Covid-19 resurgence – particularly in California, Arizona and Texas – the West and also the South account for more than a third of the nation’s employment.

A $600 weekly unemployment benefit supplement, which made up 20% of personal income, expired last Friday. Thousands of businesses have exhausted loans offered by the government to help with wages, which economists estimate saved around 1.3 million jobs at the program’s peak.

Bankruptcies are accelerating, especially in the retail sector. Demand for services has been hardest hit by the respiratory illness.

“The initial bounce from widespread re-openings is now behind us,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Further improvement will occur in fits and starts and depends on the course of the virus.”

Job growth slowed across all sectors last month:

  • The leisure and hospitality industry hired 592,000 workers, accounting for about a third of non-farm payrolls. The bulk of the jobs were at restaurants and bars.
  • Retail employment rose by 258,000 jobs, with almost half of the gain in clothing and accessories stores.
  • Professional and business services added 170,000 jobs, concentrated in the temporary help services.
  • Government employment increased by 301,000.

The unemployment rate fell to 10.2% from 11.1% in June. It was again biased downward by people misclassifying themselves as being “employed but absent from work.”

Without this error, the jobless rate would have been about 11.2%.

About 62,000 people dropped out of the labor force last month, contributing to the drop in the reported rate.

Joblessness fell across all demographic groups, but remained high for Blacks, with the unemployment rate dipping to 14.6% from 15.4% in June. The unemployment rate for Hispanics dropped to 12.9% from 14.5%. The jobless rate for whites declined to 9.2% from 10.1%.

Women, who have borne the brunt of the job losses because of child care issues, saw their unemployment rate fall to 10.5% from 11.2% mostly as they withdrew from the labor force.

“The U.S. economy was marked by intergenerational, racial, and gender inequality before the pandemic, and today’s report does nothing to alter that reality,” said Nicole Goldin, nonresident senior fellow at the Atlantic Council.

– Reuters