Another Strong Jobs Report - But Uncertainty Remains
4.8 Million Jobs Added in June
The emerging economic recovery continued to gain steam in June, as the U.S. economy gained 4.8 million jobs and the unemployment rate dropped to 11.1%. The monthly job growth is the largest on record, dating back to 1939. However, the recent resurgence of Coronavirus cases may threaten the economic recovery, just as it begins to accelerate.
Top Takeaways from the Report
Record Breaking Job Growth
Job growth in the US continued its strong expansion path in June with the addition of 4.8 million jobs, following growth of nearly 2.7 million jobs in May. June was the third month of record-breaking employment change in a row, representing the largest monthly employment jump on record.
June job growth beat expectations by 1.8 million, with a consensus projecting only 3 million jobs would be added in June
While this report provides a positive sign that the economy is headed in the right direction in June, the economy still has a long way to go to recover from historic drops earlier in the year. During March and April the economy lost a total of 22.2 million jobs. Even with the strong growth in May and June, US employment is still 14.7 million, or 9.6% below its February level.
Unemployment also trended in the right direction in June, falling to 11.1% from 13.3% in May. This is still very high compared to past recessions, but it reflects building strength in the job market. Because of the Independence Day holiday this weekend, the monthly jobs report came a day earlier than usual and coincided with the weekly report of unemployment insurance claims. Jobless claims reflected the trend of tenuous growth, with new claims dropping 55,000 from the previous week.
In addition to the topline numbers, other data from the report pointed to signs of the building recovery. The labor force participation rate increased from 60.8% in May to 61.5% in June, reflecting that more people are coming off the sidelines and back into the labor market. Annual wage growth slowed slightly in June to 5.0% compared to 6.7% in May. This is actually a good sign of growth, since it shows that lower paid workers are being reemployed and brought back to work.
Growth by Industry
Many of the employment sectors that have been hit hard by the contraction are slowly bringing jobs back as economic activity resumes.
The leisure and hospitality sector represented about 40% of all new jobs added in June, increasing 4.8 million. Within this sector, employment in food services and drinking places rose by 1.5 million, followed by amusement and recreation (+353,000) and accommodation (+239,000).
Employment in retail trade also continued to grow in June, adding 740,000 jobs after a gain of 372,000 jobs in May. Even with these jobs coming back, employment in the sector is still 1.3 million lower than in February.
Monthly job gains occurred in other employment sectors as well, including other services (+357,000), manufacturing (+356,000), professional and business services.(+306,000), construction (+158,000), transportation and warehousing (+99,000), wholesale trade (+68,000), and financial services (+68,000).
While government employment showed slight growth of 33,000 jobs in June, state government employment declined by 25,000, reflecting the struggles on the budgets of state and local governments from decreasing tax revenues.
Mining employment continued to contract in June, losing 10,000 jobs in the last month.
The Bottom Line
Every Silver Lining’s Got a Touch of Gray
While the June report reflects building strength in the economy, the recovery still remains tenuous. Ultimately, the economic recovery will be driven by the pandemic and the ability of businesses to continue to reopen. Unfortunately, the current resurgence of Coronavirus cases throughout the country could slow economic growth. Several states have paused or even reversed reopening plans for many businesses, which could threaten employment gains in impacted sectors. And with many federal stimulus benefits set to expire at the end of July, workers and businesses could face another wave of economic difficulty this summer.
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