Non-Farm Payrolls Soar for June
The U.S. economy showed signs of recovery in June with the creation of a record 4.8 million jobs as restaurants and bars began to re-open. Despite this, however, 31.5 million Americans were still collecting unemployment checks in the middle of the month, with a resurgence in Covid-19 cases suggesting the labour market could suffer yet another setback in July.
New coronavirus infections have drastically risen in large parts of the country, including Arizona and highly-populated California, Florida, and Texas, forcing several states to pause re-openings, sending workers back home.
The spike started in late June, which has hit bars and restaurants hard, was not captured in the Labor Department’s closely watched monthly employment report published on Thursday because the government surveyed businesses in the middle of the month.
The 4.8 million surges in non-farm payroll jobs in June is the biggest monthly rise since the government started keeping records in 1939. Payrolls had rebounded by 2.699 million in May, after the historic slump of 20.787 million jobs in April.
Unemployment is 14.7 million jobs higher than pre-pandemic levels, with many jobs recouped being for workers who were temporarily unemployed. President Donald Trump hailed the job gains as proof “our economy is roaring back”, despite widespread criticism of his handling of the U.S.’s pandemic response.
Federal Reserve Chair Jerome Powell this week said the economic outlook “is extraordinarily uncertain” and would depend on “our success in containing the virus.”
Hiring in June was boosted by the low-paying leisure and hospitality industry, which brought back 2.1 million jobs, accounting for about two-fifths of the rise in payrolls. The return of these workers pushed down average wages of 1.2%. Companies are cutting wages and hours. The average workweek dropped to 34.5 hours from 34.7 hours in May.
The measurement of the unemployment rate continues to be biased with people misclassifying themselves as being “employed but absent from work” last month. The jobless rate fell to 11.1% from 13.3% in May. Without this misclassification, the rate would have been 12.3%. The unemployment rate is 7.6 percentage points above its February level. Unemployment dropped for all gender and demographic groups, though joblessness stayed disproportionately high among the Black and Hispanic communities. The number of people who have permanently lost their job increased from 588,000 to 2.9 million.
Stocks on Wall Street rallied, with the Nasdaq hitting an all-time high. The U.S. Dollar Index (DXY) edged up against a basket of currencies.
Jobs in the retail, education, and health, manufacturing, construction, professional and business services sectors, transportation and warehousing, wholesale trade, and financial activities sectors all showed signs of growth.
Local governments hired teachers and support staff. But state governments, confronting reduced revenues and stressed budgets caused by the pandemic, laid off more workers. The mining industry remained unaffected.
Hiring has been boosted by the government’s Paycheck Protection Program, which gives businesses loans that can be partially forgiven if used for wages. Those funds are drying up and many companies, including some not initially impacted by lockdown measures, are struggling with weak demand, forcing them to lay off workers. This has caused a second wave of layoffs, keeping weekly new applications for unemployment benefits extraordinarily high.
With roughly a fifth of the workforce on jobless rolls, economists say the government should extend the extra $600 it pays per week in unemployment compensation when that benefit expires on July 31st.
“Failure to take action would severely dent the chances of a rapid recovery,” said James Knightley, Chief International Economist at ING in New York.
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