State of the Labor Market

June 2020 Jobs Report: Ominous Signs Beneath the Headlines

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The US economy gained 4.8 million jobs last month, and the unemployment rate is at 11.1%, down from 13.3% in May.

Today’s jobs report can easily deceive you. Almost 5 million jobs were added, but the pace of job creation is almost certainly not going to keep up. The damage done to the labor market is still staggering, with employment still 10% below February’s numbers. Yes, the unemployment rate might have declined, but workers are still losing jobs and signs point toward more and more of these losses becoming permanent.

The job gains in June were highly concentrated in the leisure and hospitality sectors, especially in food services and drinking places, with almost a third of the gains happening in those industries. While it’s great to see job growth in the sector that was directly in the line of the coronavirus, leisure and hospitality employment is still 29% below pre-pandemic levels. With virus cases spiking and businesses potentially closing once again, these gains in employment may not be sustainable moving forward.

While progress is being made in both adding jobs and getting workers into jobs, there’s still a tremendous amount of job loss occurring. In June, 7.5 million workers lost a job despite overall employment going up. That number is down from May, but it’s still 10% higher than the peak during the Great Recession. An increasing share of these workers are moving directly out of the labor force when they do lose a job, suggesting these job losses are more than a temporary layoff. Measures of more sustained job loss, such as core unemployment, are rising while the overall unemployment rate declines.

The coronavirus crisis moves so quickly that these numbers are already out of date, but the signals we can read suggest the near term future is not bright. The labor market was already in a bad place before the recent spikes in coronavirus cases, which could stall economic activity again. The next few weeks will be important to determine where we go next.

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