“More ugly times ahead”, says the economist

Are you still feeling good? It is not a trick question.

On Friday, the government reported that unemployment in Texas dropped dramatically from 13% in May to 8.6% in June. That is a significant decrease and well below the national rate of 11.1%.

Texas added 225,000 jobs last month, according to the U.S. Bureau of Labor Statistics, and the number of unemployed in Dallas-Fort Worth decreased by 29%.

“The June job market numbers show that we are moving in the right direction,” said Chairman of the Texas Workforce Commission Bryan Daniel in a statement.

Except the numbers are a month old and conditions have deteriorated since then, in Texas and much of the United States.

This week, new daily cases of COVID-19 surpassed 70,000 in the United States for the first time. On June 12, when the payroll survey was completed, the US had fewer than 25,000 new cases.

In Texas, hospitalizations and deaths have set records, and some hospitals are overwhelmed by sick patients. Many areas, including Dallas County, have suspended the start of school, which is always a boost to the local economy.

“We have more ugly times ahead,” said Bernard “Bud” Weinstein, an economist at the Cox School of Business at Southern Methodist University. “I don’t put many stocks in the month-long drop in the unemployment rate, because we are now one of the critical points of the pandemic.”

He noted that several leading companies have announced significant job cuts, including JC Penney, American Airlines and United Airlines. Later this month, a $ 600 supplement to weekly unemployment benefits is slated to end.

Meanwhile, jobless claims have been on the rise. Last week, the Texas Workforce Commission estimated that 143,500 people applied for unemployment benefits, 61% more than the week of June 20.

“The picture is clear,” said Pia Orrenius, a senior economist at the Federal Reserve Bank of Dallas. “We came back in May, earlier than we thought, and we continued to grow in early June. Everything looked good, it looked like a V [shaped recovery].

“And then there was a huge resurgence in the virus, and everything changed,” he said.

Because conditions have changed so rapidly, he said, more Dallas Fed economists are tracking high-frequency data, such as mobility and engagement rates, credit card spending, and so-called pulse surveys by the US Census Bureau. the United States.

Census pulse surveys showed that employment in Texas overtook the country in May and the first half of June. Then, the Texas numbers fell sharply, falling below the US in late June and continued to lag until mid-July.

“There was a discreet change,” said Orrenius. “The trajectory since mid-June has been quite different.”

On June 25, shortly after he reopened restaurants, bars, and amusement parks (with various restrictions), Governor Greg Abbott said the state would press the pause button. The next day, he closed bars and reduced maximum restaurant occupancy, and ordered rafting companies to suspend travel.

On July 2, Abbott said Texans would have to wear masks in public in counties that had at least 20 cases.

Some leaders have called for another blockade of the economy, both to ease pressure on health workers and to reduce the spread of COVID-19. Infection rates are so high that it is difficult to consider reopening schools and many businesses.

The Dallas Federal Reserve now projects that Texas will lose 619,000 jobs this year, a 4.8% decrease. Last month, the Dallas Federal Reserve projected a 3.2% decline for jobs statewide this year.

One reason for the downward revision is that employment in the oil and gas industry continues to decline. Mining and logging jobs fell more than 3% last month and fell 24% year-over-year through June.

That percentage decrease is deeper than in leisure and hospitality, which was crushed by the pandemic.

Last month, even the government sector lost workers in Texas, which was another negative indicator.

“Government employment is generally more stable in a recession,” Orrenius said.

Signs of a US recovery hit a plateau in early July, according to Oxford Economics. Cautious consumers are pulling back on spending, and COVID-19 cases are growing in 39 of 50 states, accounting for almost 90% of GDP, Oxford economists wrote this week. That increases the chances of a new depression if the health crisis continues to be poorly managed.

“There are great risks that the job market will weaken again,” said Oren Klachkin, chief economist at Oxford. “Don’t let the economic data for June make you think we are done with the virus.”

Many Republican leaders, led by President Donald Trump, have insisted that reviving the economy is as important as fighting COVID-19. What the past few months have shown is that the challenges are inseparable.

“Right now, where the virus goes, the economy goes,” Orrenius said. “There’s no way to avoid it”.