Unemployment Rate Drops Again, but Economy May Be Slowing

Unemployment Rate Drops Again, but Economy May Be Slowing

The U.S. economy added 4.8 million jobs in June, the Department of Labor announced Thursday, marking the second month in a row with better than expected employment data. The jobless rate fell to 11.1%, down from 13.3% in May and 14.7% in April, as employers continued to reopen their businesses and call back furloughed workers.

President Trump was quick to celebrate the results. “It's all coming back. It's coming back faster, bigger and better than we ever thought possible,” Trump told reporters. “These are the numbers. These are not numbers made up by me. These are numbers.”

Andrew Chamberlain, the chief economist at Glassdoor, said the "positive jobs report does provide a powerful signal of how swiftly US job growth can bounce back and how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months.”

About that virus. Chamberlain’s comments highlight a serious and growing problem for the economy: the failure of large parts of the country to get the virus under control.

As plenty of economists pointed out Thursday, the monthly employment report is backward looking and provides a snapshot from several weeks ago. That’s particularly relevant now, given the recent spike in coronavirus cases in much of the South and West, which is forcing state officials to reconsider their approach.

“With more than 40 percent of the country now reversing or pausing its plans to reopen, the already struggling U.S. economy has begun to show signs of another shock,” said Politico.

The initial jobless claims report was also released Thursday, and it shows that layoffs are persisting at stubbornly high levels. About 1.4 million Americans applied for unemployment benefits last week, and more than 19.3 million continue to receive payments — a slight increase from last week.

Julia Pollak, an economist at ZipRecruiter, told Politico that hiring has appears to have slowed. “That likely reflects increasing awareness that we haven’t got this virus under control yet, that businesses may have to re-close,” Pollak said. “I think that is a very upsetting and worrying thing.”

A mighty big hole to fill. Even though job growth has exceeded expectations for the past two months, the number of unemployed in the U.S. remains at historic levels. There are 14.7 million fewer jobs than there were before the pandemic began, with total employment still down by nearly 10%.

Mark Zandi, chief economist at Moody’s Analytics, warned that the recovery is by no means complete, and progress is not assured. “It’s good news, but the pandemic pushed us into a very deep economic hole and we’re crawling out and it’s a long way to go,” he said. “We can certainly fall back.”

Ominously, the number of people who have permanently lost their jobs is growing. “The first thing I looked at was number of people permanently laid off and that continues to climb, and I think that’s some cause of concern,” Moody’s Ryan Sweet told Bloomberg. “Even when this pandemic’s over those people are going to need to find work.”