The U.S. labor market continued to regain ground in July, though at a slower pace, indicating the economic rebound is still making headway despite a surge in coronavirus infections.
Payrolls increased by 1.76 million in July, beating estimates for a 1.48 million gain and after a 4.79 million advance in June, according to data Friday from the Labor Department. The unemployment rate fell by more than expected, to 10.2%, while a broader gauge of joblessness also declined to 16.5%.
The data point to a labor market that’s on the mend as the economy crawls its way back from the depths of a virus-induced recession. At the same time, the jobless rate remains high and the path forward will be uneven, with higher-frequency indicators turning more negative as businesses use up the last of their federal loans and reduced unemployment benefits pressure consumer spending.
“There is some moderation in the pace of job creation, naturally, as you get past the initial bounce in activity upon reopening,” said Michelle Meyer, head of U.S. economics at Bank of America Corp. “It’s still a long road ahead in terms of fully recovering the labor market, but progress is being made.”
U.S. equities dipped amid growing speculation that lawmakers won’t be able to agree on a new round of economic stimulus. The dollar strengthened and the yield on the 10-year Treasury note eased slightly.
With lawmakers and administration officials struggling to reach an accord on a new relief package, President Donald Trump said on Thursday he’s likely to sign an order Friday or over the weekend extending the enhanced unemployment benefits and imposing a payroll tax holiday.
What Bloomberg’s Economists Say
“Following an unprecedented swing from severe drop to sharp rebound, the economy is entering more conventional recession dynamics. A prolonged period of elevated unemployment and subdued participation in the labor market will weigh heavily on income growth, personal spending and top-line growth.”
— Yelena Shulyatyeva, Andrew Husby and Eliza Winger
Employment remains about 13 million below the pre-pandemic level in February, when the recession officially started, the July data show.
Adjusted for the misclassification of unemployed Americans as employed — an issue that’s plagued the data to varying degrees since March — the jobless rate would have been about 1 percentage point higher, the Labor Department said.
The increase in employment reflected further reopening effects on the leisure and hospitality industry, where payrolls at restaurants jumped by a half million. Retail trade employment also increased, though at a slower pace, with more than 250,000 jobs added. Health care and social assistance payrolls rebounded as doctors’ offices continued to open and as demand for day care increased.
At the same time, manufacturing employment rose just 26,000 in July, well below forecasts and held back by declines in payrolls at producers of fabricated metals, machinery and computers and electronic products. Auto makers added more than 39,000 workers.
The report also showed a 241,000 jump in local government employment, reflecting seasonal adjustments. Federal government employment increased 27,000 in July, boosted by hiring of temporary workers for the Census.
Layoffs have been piling up in the past several weeks, particularly in industries most affected by the pandemic. American Airlines Group Inc. advised that 25,000 jobs are at risk when aid expires and United Airlines Holdings Inc. said it would furlough one-third of its pilots. L Brands Inc., which owns Victoria’s Secret, said it would lay off 15% of its workforce.
On the other hand, Amazon Inc., Alphabet Inc., Ford Motor Co. and D.R. Horton Inc., are among companies that have been adding, or plan to increase, headcount.
Black American unemployment dropped to 14.6%, compared with 9.2% for Whites and Hispanic unemployment of 12.9%, the Labor Department’s jobs report showed. The jobless rate for women, who carry the most responsibility for childcare and homecare duties, fell to 10.5% and for men it dropped to 9.4%.
The data showed little change in the number of Americans who lost their jobs permanently in July. The number remains well below that during the financial crisis.
–With assistance from Chris Middleton, Edith Moy and Sophie Caronello.
–By Katia Dmitrieva (Bloomberg)