The return of the US job market coronavirus continued in June when the economy gained a record 4.8 million jobs, exceeding Wall Street expectations. The unemployment rate fell to 11.1%. The Dow Jones Industrial Average rose in the first shares of the stock market after the report, but earnings faded later in the morning.
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The Labor Department also reported that 1,427 million Americans filed new claims for unemployment benefits last week, 55,000 fewer than the previous week, but still stubbornly high. The number of people who continued to claim regular unemployment benefits in the week of June increased from 59,000 to 19.29 million.
Wall Street expected the June jobs report to show a gain of 3 million jobs and an unemployment rate of 12.4%. Economists expected 1.4 million new jobless claims.
Dow Jones, Treasury yields react to jobs report
The Dow Jones rose as high as 450 points, but gains declined to 110 points, or 0.4%, after the industrial average hit resistance near its 200-day moving average. The Nasdaq compound rose 0.6% after hitting an intraday record. The S&P 500 was up 0.5%.
The Dow closed nearly 13% of its February record on Wednesday, while the S&P 500 closed 8% of its record. While the technology has outperformed, the broad stock market lost steam shortly after the successful May 5 June jobs report, as concerns grew about an increase in Covid-19 cases across the belt of the sun. Florida reported more than 10,000 cases of coronavirus on Thursday alone.
The 10-year Treasury yield, which rose to 0.96% in the May jobs report, has slowed as doubts about the recovery from the coronavirus grew. After the record jobs report, the 10-year yield barely budged from about 0.68% of what the bond market sees as old news.
Job report details
The leisure and hospitality sector gained almost 2.1 million jobs, although it still remains almost 4.8 million below February levels. Food and drink venues totaled just under 1.5 million. Hotels and motels earned 239,000. Amusement parks, casinos and recreation venues added 353,000.
Healthcare employment grew by 358,000, and dentist offices added 190,000 as they continued to recover from the Covid-19 lockdown. Retailers added 740,000 jobs, including 202,000 in clothing and accessories stores.
The factories recovered 356,000 workers, led by 196,000 auto workers. But manufacturing employment has still dropped 757,000 since February.
Employment continues to drop 14.7 million from the February peak, after the combined gain of 7.5 million in the past two months.
Unemployment fell in June, but 32 million Americans claim benefits
The drop in the unemployment rate to 11.1% in June was an even bigger improvement than May’s 13.3% unemployment rate than it seemed. The Labor Department says fewer workers were wrongly classified as employees but not on the job. If those workers had been properly counted, the government estimates the June unemployment rate would have been 12.3%, compared to an adjusted rate of 16.4% in May.
According to the monthly household survey, 17.75 million Americans are unemployed, up from 23.1 million in April. But the number of Covid jobs is still huge. The ranks of people who want a job but haven’t looked for it have grown by about 4 million in the past year. Then there are perhaps 2 million people who have been misclassified as employees.
The weekly report on unemployment benefit claims has seen limited progress lately, with new claims falling by just 139,000 to 1.43 million in the past three weeks.
In the week through June 13, 31.5 million Americans received unemployment benefits, just under 30 million a year ago. That does not include about 4.5 million people who have claimed either regular state unemployment benefits or emergency pandemic benefits in the past two weeks. As of June 13, 12.85 million people received the benefits of the pandemic, opening up jobless aid to freelancers and others who don’t qualify for regular benefits, as if they haven’t had enough recent work experience.
Coronavirus recovery progress in doubt
The June jobs report reflects the momentum of the economy before state governors and businesses began to react to the surge in Covid-19 cases. The half-month household and business survey spanned the period from mid-May, when states had just two weeks to gradually reopen.
Since then, Texas, Florida, Arizona, and parts of California have closed bars. Arizona imposed the broader restrictions, also closed gyms and movie theaters. Other states, seeing the damage in states that opened early, have begun to scale back some of their reopening plans.
In the meantime, Apple (AAPL) has closed a total of almost 50 stores in areas heavily affected by Covid-19. McDonald’s (MCD) has said it would stop increasing indoor food, which has only returned to about 2,000 of 14,000 restaurants. Disney (DIS) has delayed its scheduled reopening for Disneyland on July 17.
JD Power said Wednesday that weekly car sales have decreased in the past two weeks. Auto sales recovered from more than 50% below pre-virus forecasts to just 4% slower than the pace in the week of June 14. But sales fell 8% below pre-Covid forecasts for the week through June 28.
The Homebase data, whose applications track small business hours, have recently shown an “absolute leveling off or decline in small business activity,” wrote Nomura chief economist Lewis Alexander. That is a particular concern given the huge contribution of small businesses to job recovery so far, he wrote.
Jefferies economists Aneta Markowska and Thomas Simons this week noted a “loss of momentum” reflected in small business activity, retail store closings, traffic congestion and web traffic to unemployment portals.
The programs show “a particular weakness in virus-affected states, suggesting that Covid’s resurgence is the main culprit,” they wrote. Given the timing of the coup, the June data should be fine, but the July data is in danger of surprising to the downside. “
Follow Jed Graham on Twitter at @IBD_JGraham for information on economic policy and financial markets.
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