US is Adding Jobs and New Economy is Taking Shape

US is Adding Jobs and New Economy is Taking Shape

The US economy added just 1.8 million jobs in July, far fewer than in May and June but not as bad as some economists feared, according to government data released Friday.

As COVID-19 cases spiked in several states in recent weeks, new restrictions to contain the virus forced some businesses to shut their doors again, while many have already closed permanently, raising concerns the labor market could take a turn for the worse.

The unemployment rate fell to 10.2 percent from 11.1 percent in June, still slightly worse than the depth of the global financial crisis in October 2009.

However, the Labor Department said some workers continue to be misclassified in the survey. Without that, the jobless rate would have been a full point higher than reported.

The July employment gain marked a sharp slowdown from the increases of 4.8 million in June and 2.7 million in May, and means less than half the 22 million payroll jobs lost during the pandemic have been regained.

“This is far from normal, as another 13 million jobs are needed just to get us back to pre-pandemic employment levels,” said Lawrence Yun, chief economist of the National Association of Realtors, who noted virus cases are rising faster in states that reopened, “Illustrating the tough tradeoffs in the decision between livelihood versus lives.”

The outlook for July data was thrown into doubt when payroll services firm ADP on Wednesday reported a shocking private payrolls increase of just 167,000, about 1.5 million below the consensus estimate.

But once again the closely watched ADP data proved to be wildly out of sync with the all-important Labor Department report, which showed private payrolls rose 1.5 million.

– ‘Slow and prolonged’ –

The largest jobs gains were reported in leisure and hospitality and retail, the sectors hardest hit by the coronavirus shutdowns, the report said. Government and healthcare also saw strong hiring.

But with just two more reports before President Donald Trump faces a difficult reelection bid, economists warn the employment rebound will continue to be sluggish, as payrolls remain far below their level in February before the pandemic forced a near total shutdown of the US economy.

“Recovery in jobs to pre-pandemic levels will likely be slow and prolonged, one that will restrain the pace of recovery,” Rubeela Farooqi of High Frequency Economics said in an analysis of the data.

Meanwhile, Trump’s economic team has not been able to narrow the gap with Democratic leaders in Congress over a new emergency spending bill.

Officials say that after days of intense negotiations the sides remain far apart, and the administration is steadfastly refusing to agree to provide further aid to state and local governments, which economists say face a crunch that could lead to a massive new wave of layoffs.

Another key source of debate is the $600 in additional weekly payments to the unemployed, which expired at the end of July. Republicans claim the money offers an incentive for workers to stay home rather than return to work, but economists say that is disproven by research.

The number of people on temporary layoff in July decreased by 1.3 million, but there were nearly three million workers who lost their jobs permanently, according to the latest data.

Meanwhile, 8.4 million people were working part-time not by choice but out of necessity, a group known as involuntary part-time workers.

And the jobless rate for Black workers remains far higher than the national rate at 14.6 percent, compared to 9.2 percent for white workers.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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