(Bloomberg) – The third straight month of the U.S. labor market of solid improvement from the depths of the pandemic could very well be its last in a while.
Workers returned to low-wage jobs at restaurants and retailers as large cities – particularly New York – reopened early in the month. Since then, however, many measures of activity have been leveled and a key relief program has expired with no agreement on a new deal. The July employment report also showed that millions of Americans who lost their jobs in the early days of the pandemic remain unemployed, with the overall rate still almost three times the pre-crisis level.
“We’ve had the easy gains and the job market is getting a little more difficult now,” said Brett Ryan, senior U.S. economist at Deutsche Bank AG. “Going forward, the expectation should be a slow step-down” and “it may not be a straight line in terms of improvement every month.”
Employers added 1.76 million jobs in July, about 300,000 more than economists expected, according to data from the Department of Labor Friday. The unemployment rate fell by about 1 percentage point to 10.2%, just above the peak after the financial crisis of 2008, but a marked decline of almost 15% at the height of the pandemic.
Further job gains are becoming increasingly difficult with no vaccine in sight yet, and several signs point to weakness in months ahead: a $ 600 federal supplement to weekly unemployment benefits, which provided extra money to support households, expired at the end of July. This means that less dollars have been spent in the economy and on companies, which also have the end of funds through the Paycheck Protection Program.
Unemployment benefits are especially important for millions of unemployed months. Of the 16.3 million unemployed Americans in July, nearly 8 million had been out of work for 15 weeks or longer, or roughly since the beginning of the pandemic. That figure was up 4.7 million from June.
Meanwhile, negotiations on expanding the relief have been halted.
“The talks are currently stalled,” White House economic adviser Larry Kudlow told Bloomberg Television after the report on Friday. Despite that, President Donald Trump intends to use executive orders to get “certain priorities through,” including a cut in tax service and a moratorium on eviction, he said. Kudlow called the economic recovery “V-shaped”.
But that recovery is on hiatus, casting a shadow over the labor market. High frequency indicators show that economic and wage role activity slowed or decreased in the weeks after the survey period for the government’s work report, which takes place at the beginning of the month.
“What we have is an economy that is still adding, but with the delay in recovery, we are preparing for a very dubious report in August,” said Joel Naroff, president of Naroff Economics LLC.
Read more: Bloomberg’s TOPLive blog about the job report
U.S. stocks were mixed on Friday as investors doubted lawmakers would be able to agree on a new round of economic stimulus with a better report than jobs.
What the Bloomberg Economists Say
“After an unusual swing from severe decline to sharp handball, the economy is entering with more conventional recession dynamics. A prolonged period of rising unemployment and submerged participation in the labor market will weigh heavily on income growth, personal spending and topline growth. “
– Yelena Shulyatyeva, Andrew Husby and Eliza Winger
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Low-wage sectors accounted for profits: wage statistics at restaurants jumped by half a million, retail employment also increased, albeit at a slower pace, with more than 250,000 jobs added. Wages for health care and social assistance returned as doctors’ offices continued to open and increased as demand for day care increased.
Producing employment rose to 26,000 in July, about one-tenth of forecasts. Car manufacturers added more than 39,000 workers.
Government services
The report also showed a jump of 241,000 in local government employment, and reflected seasonal adjustments in the education sector.
While hiring companies including Amazon Inc., Alphabet Inc., Ford Motor Co. and DR Horton Inc., layoffs have piled up in recent weeks, particularly in industries most affected by the pandemic. American Airlines Group Inc. advised that 25,000 jobs were at risk if the aid expired and that United Airlines Holdings Inc. said it would exit one-third of its pilots. L Brands Inc., which owns Victoria’s Secret, said it would scrap 15% of its workforce.
The July employment report also did not show much improvement for Black Americans, with their unemployment rate rising slightly to 14.6%, compared with 12.9% for Spanish workers and 9.2% for whites. The unemployment rate for women, who bear most of the responsibility for childcare and home care, fell to 10.5% and for men it dropped to 9.4%.
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