Record U.S. job growth expected in June, but masks labor
market weakness
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[July 02, 2020] By
Lucia Mutikani
WASHINGTON (Reuters) - The U.S. economy
likely created jobs at a record clip in June as more restaurants and
bars resumed operations, which would offer further evidence that the
COVID-19 recession was probably over, though a surge in cases of the
coronavirus threatens the fledgling recovery.
The Labor Department's closely watched monthly employment report on
Thursday would add to a stream of data, including consumer spending,
showing a sharp rebound in activity.
But the reopening of businesses after being shuttered in mid-March has
unleashed a wave of coronavirus infections in large parts of the
country, including the populous California, Florida and Texas.
Several states have been scaling back or pausing reopenings since late
June and sent some workers home. The impact of these decisions will not
show up in the employment data as the government surveyed businesses in
the middle of the month.
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Federal Reserve Chair Jerome Powell this week acknowledged the rebound
in activity, saying the economy had "entered an important new phase and
(had) done so sooner than expected." But he cautioned the outlook "is
extraordinarily uncertain" and would depend on "our success in
containing the virus."
"As the economy is reopening a lot of the jobs lost have come back and
activity is coming back as well," said Steven Blitz, chief U.S.
economist at TS Lombard in New York. "The problem is the virus still has
a big say in determining the trajectory of the recovery."
According to a Reuters survey of economists, nonfarm payrolls likely
increased by 3 million jobs in June, which would be the most since the
government started keeping records in 1939. Payrolls rebounded 2.5
million in May after plunging by a historic 20.687 million in April.
Despite two straight months of eye-popping gains, employment would still
be about 16.6 million jobs below its pre-pandemic level. The
unemployment rate is forecast dipping to 12.3% from 13.3% in May.
Employment is increasing largely as companies rehire workers laid off
when non-essential businesses like restaurants, bars, gyms and dental
offices among others were closed to slow the spread of COVID-19.
Economists have attributed the burst in job gains to the government's
Paycheck Protection Program, giving businesses loans that can be
partially forgiven if used for wages. Those funds are drying up.
LAYOFFS STILL ELEVATED
In an economy that had already fallen into recession as of February,
many companies, including some not initially impacted by lockdown
measures, are struggling with weak demand.
Economists and industry watchers say this, together with the exhaustion
of the PPP loans, has triggered a new wave of layoffs that is keeping
weekly new applications for unemployment benefits extraordinarily high.
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![](../images/070220pics/busine29.jpg)
People line up outside Kentucky Career Center prior to its opening
to find assistance with their unemployment claims in Frankfort,
Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston
![](http://archives.lincolndailynews.com/2020/Jul/02/images/ads/current/bennett_lda_123015.png)
A separate report from the Labor Department on Thursday is expected to show
initial claims for state unemployment benefits likely totaled a seasonally
adjusted 1.355 million for the week ended June 27 down from 1.48 million in the
prior week, according to another Reuters survey of economists.
"Job losses are starting to bleed to other sectors of the economy, income groups
and different skill sets," said Mark Zandi, chief economist at Moody's Analytics
in West Chester, Pennsylvania.
The claims report is also expected to show the number of people receiving
benefits after an initial week of aid likely fell to 19 million in the week
ending June 20 from 19.5 million the week before. These so-called continued
claims, which are reported with a one-week lag, have dropped from a record
24.912 million in early May.
For a more accurate picture of the labor market, economists recommend focusing
on continuing claims and data on the total number of unemployment checks
recipients. About 30.6 million people were collecting unemployment checks in the
first week of June.
The jobless rate, which is the more standard measure of unemployment, has been
biased down since March by people incorrectly misclassifying themselves as
"employed but absent from work." The Labor Department's Bureau of Labor
Statistics has been working with the Census Bureau to rectify this.
Without the misclassification issue, the unemployment rate would have been 16.3%
in May instead of 13.3% and would have peaked at about 19.7% in April.
![](http://archives.lincolndailynews.com/2020/May/08/images/ads/current/culligan_sda_daily_FESTIVALS_2017.png)
Job gains last month were likely concentrated in the typically low paying
leisure and hospitality industry. The return of these workers is expected to
have further depressed average wages in June. Some companies are cutting wages
and reducing hours. Average hourly earnings are forecast declining 0.7% after
dropping 1.0% in May. The average workweek is expected to dropped to 34.5 hours
from 34.7 hours.
States and local governments likely laid off more workers as they confront
reduced revenues and stressed budgets caused by the pandemic.
"A federal government failure to aid state and local governments and avoid
income cliffs over the summer would further jeopardize the recovery," said Lydia
Boussour, a senior U.S. economist at Oxford Economics in New York.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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