WASHINGTON (AP) — A resurgence in COVID-19 cases didn’t shut off the American job creation machine last month — but it did slow it down.
Employers added 1.8 million jobs in July, slightly more than had been expected but far fewer than the gains of the previous two months. And while the unemployment rate dropped from 11.1% to 10.2%, it remains worrisomely high.
The coronavirus outbreaks and the resulting lockdowns and fear that kept Americans away from restaurants, bars and shops hammered the economy in the spring. Employers slashed tens of millions of jobs as businesses shut their doors to slow the virus' spread. The economy shrank at a harrowing annual rate of nearly 33% from April through June — by far the worst three months on record.
As businesses began to reopen, the job market came back, recording unprecedented gains in May and June. But a surge in confirmed viral cases as summer began heightened doubts about whether a meaningful recovery can be sustained, especially with Congress deadlocked over proposals to provide further aid to the unemployed and to struggling states and cities.
Here are five takeaways from July’s jobs report:
JOBS GREW, BUT MORE SLOWLY
Some economists feared that the resurgence in COVID cases would stop the jobs recovery in its tracks. It didn’t. July’s 1.8 million new jobs marked the third-best month of job creation on record. The problem is that hiring was down sharply from May’s 2.7 million added jobs and June’s 4.8 million.
All told, the United States has recovered just 42% of the jobs that were lost in March and April. And the weakening pace of hiring suggests a long slog of a recovery ahead.
Rising viral cases in the South and West have forced many businesses to delay or reverse plans to reopen. In Texas, for instance, just 26% of bars were closed as of June 21. Two weeks later, the figure had shot up to 74%, though it has since declined slightly, according to the data firm Womply.
Moreover, a tentative economic comeback had been supported by a government relief program that included a crucial $600-a-week federal add-on to weekly state unemployment benefits. It allowed millions of unemployed people to afford necessities.
But the expanded jobless aid has now expired, and Congress has failed to extend it or provide other financial stimulus to Americans. The loss of that money means that tens of millions of jobless Americans can't spend as much as they formerly did, which, in turn, means a drag on the economy.
"The loss of enhanced unemployment benefits and an inability to pass another stimulus bill will threaten a labor market recovery that already appears to be losing momentum,’’ Scott Anderson, chief economist at Bank of the West, wrote in a research report.
BLUE-COLLAR JOB GROWTH SLOWED SHARPLY
Hiring by private companies has increasingly narrowed to service businesses, like restaurants and retail shops, in contrast to factories, construction companies, mines and other goods-producing companies. In May, goods producers had added 676,000 jobs (21% of new private sector positions) and then 515,000 (11%) in June before adding far fewer — 39,000 (less than 3% of new positions) — in July.
Among factories, the lone exception last month was automakers, now enjoying an uptick in sales because of falling loan rates and some pent-up demand for cars. Auto companies accounted for all of July's factory hires.
Recent job gains, Anderson noted, mainly reflect businesses that are recalling workers they had let go in the spring when the pandemic suddenly struck hard. By contrast, he wrote, “job growth downshifted sharply last month in manufacturing, construction, information and business services, signaling prolonged labor market weakness just below the surface."
GOVERNMENT JOB GAINS WERE LIKELY EXAGGERATED
The Labor Department's July figures show that government at all levels added 301,000 jobs last month, up from 54,000 in June. That appeared to be a surprisingly strong performance.
But the government job gains were exaggerated by a technicality: Many local school districts had laid off teachers, bus drivers and school cafeteria workers early this year because of the pandemic lockups — in the spring, instead of in the summer as usual. That change warped the Labor Department’s summertime seasonal adjustments and had the effect of inflating its count of government workers in July.
Economists are nervously monitoring government employment. Many have been urging Congress to deliver massive aid to state and local governments that are suffering a loss of tax revenue from the recession and are prevented by balanced-budget requirements from stimulating their economies with stepped-up spending.
But Congress has yet to agree on providing any further help to state or local governments.
BLACK AND HISPANIC WORKERS GAINED, BUT DISPARITIES PERSIST
Black and Hispanic workers gained jobs at a faster pace than whites in July, but their unemployment rates remain far higher.
The number of Black Americans who were employed grew by 234,000 or 1.4%. And the number of employed Hispanics grew by 174,000 or 0.7%. White employment grew by 688,000 or just 0.6%. African Americans and Hispanics are more likely to occupy the service sector jobs that have been called back to work.
Still, 14.6% of Black and 12.9% of Hispanic adults were unemployed in July, versus 9.2% of whites — the continuation of a longstanding racial disparity in joblessness.
MANY WERE RELUCTANT TO JUMP INTO THE JOB MARKET
The recent hiring gains haven't managed to draw many more Americans off the sidelines to look for jobs. The labor force — which includes people who either have a job or are looking for one — dipped last month by 62,000, to 61.4% of the adult population from 61.5% in June.
“With coronavirus cases surging and the economic recovery faltering, discouraged and fearful workers were likely more reluctant to rejoin the official ranks of those seeking work,” said Lydia Boussour, senior economist at Oxford Economics.