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Jobs Rebound Slows as Pandemic Lingers

Jobs Rebound Slows as Pandemic Lingers

The U.S. economy continued to regain some of the millions of jobs lost from economic fallout from the COVID-19 pandemic. However, combined job gains in the past three months still account for less than half the jobs lost in April alone, indicating recovery is still happening slowly.

In July, the U.S. added 1.8 million jobs to payrolls, according to the Bureau of Labor Statistics (BLS). This was a moderately higher rate than economists’ expectations of about 1.6 million jobs. July’s monthly gain was far less than the 4.8 million jobs added in June, as coronavirus flare ups around the country caused many state and local governments to reinstate strict controls on certain business operations. However, July’s monthly gain marks the third consecutive month of recovery after the astounding job losses seen in March and April.

In another positive reading, the U3 or “headline” unemployment rate fell further, going from 11.1% in June, to 10.2% in July, down about 450 basis points (bps) from the April peak of 14.7%. However, actions taken by state and local governments in the past month to stem increasing infection rates may cause the unemployment rate’s recovery to stall, if not reverse slightly.

The unemployment rates for men and women both declined about 80 bps in June, but the rate for men is about 80 bps lower than for women, when both had been about equal prior to the pandemic. School reopening rates could exacerbate this difference further.

Annual hourly earnings growth for all employees was 4.8% in July, according to the BLS. This was about the same as the hike seen in June and 130 bps higher than the July 2019 showing. The monthly wage figure increased $0.07 between June and July, and was up $1.34 from July 2019, to $29.39. Annual wage growth had been averaging about 3.2% for the past two years prior to the pandemic, with average annual increases of about $0.85. As more lower-paying jobs return, average hourly wage levels will revert closer to previous norms.

The industries hardest hit by the shutdowns continued to see the most improvement, but the rate of recovery has slowed sharply. In addition to jobs temporarily lost due to the re-imposition of ordered closures and business limitations in areas with infection flare ups, several businesses are facing bankruptcies. Permanent closures could cause moderate-to-long-term damage to the economy.

The 1.8 million jobs added in July, while lower than May and June’s gains, still outpace the average monthly gain since the Great Recession of about 200,000 jobs. However, the total number of jobs gained from May to July (9.3 million) accounts for only 44.6% of the 20.8 million jobs lost in April. In July, total non-agricultural employment of 139.6 million is still well below the July 2019 level of almost 151 million. The annual percent change in employment, which had averaged about 1.4% prior to March, was -7.5% in July, compared to -13.4% in April.

The civilian labor force (CLF) participation rate was 61.4% in July, down barely 10 bps from June, but 120 bps higher than April. The CLF hardly changed from June, down by 62,000 jobs, 3.5 million fewer than last year. The employment-population ratio increased from June’s rate of 54.6% to 55.1% in July. That ratio is far below July 2019’s rate of 60.7%. The total number of unemployed (16.34 million) is improved by 1.4 million from June but is more than twice the level of last year. The number of people not in the labor force who currently want a job has declined from about 8.2 million in June to 7.7 million in July.

Despite some retightening of business operations, the number of unemployed workers on temporary layoff declined from June to about 9.2 million in July as some businesses reopened. That number will likely increase in August as business closures continue. The number of permanent job losses changed little from June at almost 2.9 million after previously averaging about 1.3 million. The number of employed part-time workers for economic reasons is still more than twice last year’s rate at 8.4 million in July, but down about 600,000 from June.

The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, fell from 18.0% in June to 16.5% in July. Persons marginally attached to the labor force increased by 549,000 from July 2019 to 2.03 million. Persons marginally attached to the labor force are those who are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.

Although first-time unemployment claims have slowed on a weekly basis, those unemployed for less than five weeks increased to 3.2 million in July, up from 2.8 million last month. However, the 5-to-14-week category saw a decrease of 6.3 million to 5.2 million. The longer-term category of unemployed workers (those out of work for 27 weeks or more) increased to 1.5 million in July from 1.4 million in June.

Industry Focus

Industries with notable job increases looks similar to June, but at a lower scale in July. July’s jobs report from the BLS showed gains in all industries that experienced steep losses in April. Leisure and Hospitality gained the most jobs again in July at 592,000, with significant gains in Government, Trade, Transportation & Utilities, Education & Health Services, and Professional & Business Services. The Information and Mining and Logging industries were the only sectors of the economy to lose jobs in July.

• Of the 592,000 jobs gained in Leisure and Hospitality in July, 502,000 or 85% were in the food services and drinking places subsector. While many restaurants and bars reopened or increased capacity in July, others have closed or reduced capacity. Another 87,100 jobs returned in the arts, entertainment, and recreation sector, although a gain of 99,600 jobs in the amusements, gambling, and recreation subsector were offset by a loss of 12,800 jobs in the performing arts and spectator sports subsector.

• Government employment jumped by 301,000 in July, with local government education gaining 215,100 jobs. Local decisions on school openings will determine trends in this subsector going forward. Federal and state employment increased by 27,000 and 33,000 jobs, respectively.

• Retail trade again saw the second strongest rebound of any subsector after restaurants with a gain of 258,300 jobs in July. This accounts for about 89% of the Trade, Transportation and Utilities industry’s gain of 291,000 jobs. Clothing and clothing accessories stores contributed the most to that total (+120,800). Wholesale trade lost 5,300 jobs in July while the transportation and warehousing sector gained 37,900 jobs.

• The Education and Health Services industry gained 215,000 jobs in July as offices of physicians, dentists, and other health practitioners gained a combined 92,900 jobs. The social assistance sector (+65,900) benefited from daycare center reopenings, as employment rose by 45,100 in this subsector. The educational services sector added 23,500 jobs for the month.

• The Professional and Business Services industry’s July gains (+170,000) were almost completely in the administrative and support services subsector (+168,100). Temporary help services (+143,700) accounted for the bulk of that gain as employers may be reluctant to commit to full-time employment. The higher-paying professional and technical services sector added 14,700 jobs with the other professional and technical services subsector gaining 17,700 jobs. This group includes marketing research and public opinion polling, photography services and veterinarians.

• The Other Services sector gained 149,000 jobs in July, with the rebound in the personal and laundry services subsector (+118,600). Repair and maintenance and membership associations subsectors added between 10,000 and 20,000 jobs each.

• Durable goods manufacturing contributed more than half of the Manufacturing industry’s gain of 26,000 jobs for the month (+15,000). Strong gains in transportation equipment (+33,200) were somewhat offset by losses in fabricated metal products (-11,400). Nondurable goods manufacturing added a respectable 11,000 jobs in July, primarily in food manufacturing (+7,300) and miscellaneous nondurable goods (+8,500).

• The Financial Activities industry gained 21,000 jobs in July, with the real estate and rental and leasing services (+14,500) sector again the primary contributor. Finance and insurance added 7,100 jobs, with gains across several subsectors outpacing a loss of 4,900 jobs in commercial banking.

• The Construction industry gained 20,000 jobs in July with virtually every sector and subsector benefitting. Specialty trade contractor employment grew by 11,200 jobs and the construction of buildings sector added 7,000 jobs for the month. Only the nonresidential subsector of construction of buildings lost 9,300 jobs in July.

• The Mining and Logging industry lost jobs in July again (-7,000) as the support activities for mining subsector shed 10,600 jobs. Mining, except oil and gas reversed a downward trend with a gain of 2,300 jobs. Oil and gas extraction gained 1,300 jobs in July, despite concerns in the industry due to lower energy prices.

• The Information industry lost 15,000 jobs in July, with only minor gains in broadcasting and other information services. The publishing (-6,900) and motion picture and sound recording (-4,200) subsectors lost the most jobs.