U.S. employers likely rehired several million more workers in June, thereby reducing a Depression-level unemployment rate, but the most up-to-date data suggests that a resurgent coronavirus will limit further gains.
Economists have forecast that businesses, governments and nonprofits added 3 million jobs — a record high — and that the unemployment rate fell a full percentage point to 12.3%, according to data provider FactSet. The predicted hiring gain would be up from 2.5 million jobs in May. Even so, the combined job growth for May and June would recover only a fraction of the 22 million jobs that were lost in March and April, when the virus forced business shutdowns and layoffs across the country.
And even a jobless rate above 10% wouldn’t fully capture the scope of the pandemic’s damage to the job market and the economy. Millions more people are working part time but would prefer full-time work. And an unusually high proportion of workers have been subject to pay cuts, research has found.
With confirmed coronavirus cases spiking across the Sun Belt, a range of evidence suggests that a nascent recovery is stalling. In states that are suffering the sharpest spikes in reported virus cases — Texas, Florida, Arizona and others — progress has reversed, with businesses closing again and workers losing jobs, in some cases for a second time.
On Wednesday, California re-closed down bars, theaters and indoor restaurant dining across most of the state. And Arizona’s outbreak grew more severe by nearly every measure. Florida has closed some beaches.
Credit and debit card data tracked by JPMorgan Chase show that consumers have slowed their spending in just the past week, after spending had risen steadily in late April and May. The reversal has occurred both in states that have seen surges in reported COVID cases and in less affected states, said Jesse Edgerton, an economist at J.P. Morgan.
Nationwide, card spending fell nearly 13% last week compared with a year ago. That was worse than the previous week, when year-over-year card spending had declined just under 10%.
Real-time data from Homebase, a provider of time-tracking software for small businesses, shows that the number of hours worked at its client companies has leveled off after having risen sharply in May and early June. Business re-openings have also flattened. The economic bounce produced by the initial lifting of shutdown orders may have run its course.
Still, Thursday’s jobs report will be based on data gathered in the second week of June, so it will still likely reflect an improving hiring trend. Last week’s plateau in hours worked will instead affect the July jobs figures, to be released in early August.
“Whatever picture the jobs report gives us, things have become worse since then,” said Julia Pollak, a labor economist at ZipRecruiter.
In addition to the renewed shutdowns across the Sun Belt, New York City has postponed plans to reopen indoor seating at restaurants in the face of more confirmed virus cases. Such moves are causing another round of layoffs or will limit future hiring.
McDonald’s has paused its reopening efforts nationwide. And Apple said it will re-close 30 more of its U.S. stores, on top of 47 it had already shut down for a second time.
Economists have long warned that the economic benefits of allowing businesses to reopen would prove short-lived if the virus wasn’t brought under control. Until most Americans feel confident enough to dine out, travel, shop or congregate in groups without fear of infection, restaurants, hotels and retailers won’t have enough demand to justify rehiring all their previous workers.
“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” Federal Reserve Chair Jerome Powell told a House committee this week. “A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”
Still, some bright spots in the economy may emerge in Thursday’s jobs report. Manufacturers expanded in June after three months of shrinking, the Institute for Supply Management, a trade group, said Wednesday. New orders are flowing in and factories are adding more jobs, the ISM said.
And record-low mortgage rates are encouraging more home buyers. Purchases of new homes rose sharply in May. And a measure of signed contracts to buy existing homes soared by a record amount in May, a sign that sales should rebound after falling for three straight months.
Republished with permission of the Associated Press.