Nearly 5 Million Jobs Gained in June; Unemployment Rate Drops Again

Job loss elevated despite employment gains; over 1 million new jobless claims continue to be filed each week

Roy Maurer By Roy Maurer July 2, 2020
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The U.S. economy showed positive job gains for the second straight month in June, adding 4.8 million jobs, and the unemployment rate fell to an approximate 12 percent (after being adjusted for a misclassification error) from an adjusted 16.4 percent in May, according to the latest report from the Bureau of Labor Statistics (BLS). A significant rebound was reported in industries such as leisure and hospitality and retail, sectors that once experienced the greatest job losses, as the economy slowly continues to recover. But the reporting was conducted in mid-June, meaning recent developments, like the surge in coronavirus cases and business closures in some states, aren't yet captured in the data.

The gains reflect a partial resumption of economic activity that had been paused due to the COVID-19 pandemic, when employment fell by a total of 22 million in March and April alone.

"The U.S. labor market roared back to life in June; however, today's report is an already-outdated look in the rearview mirror," said Andrew Chamberlain, chief economist at Glassdoor. "With surging COVID-19 cases hitting new highs in California, Texas and Florida in the past week, this report arrives against the ominous backdrop of a second wave that could shutter millions of American small businesses and put a freeze on hiring."

The report can be deceiving, agreed Nick Bunker, an economist at the Indeed Hiring Lab. "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 percent 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."

It's a case of surface good news masking underlying bad news, said Josh Wright, chief economist at Wrightside Advisors, an economic research and consulting firm based in New York City. "Temporary jobs continued to rush back in—and faster than median expectations—providing another leg of the hoped-for V-shape in the recovery. But there are problems lurking, starting with job losses being increasingly permanent. While the initial tsunami of temporary job losses is receding, the permanent job losses are rising. As many of the more thoughtful analysts have noted, the true recessionary dynamic is still in the early stages as the natural-disaster dynamic continues to recede."

June Hiring Swelled at Bars, Restaurants

The strong employment gains were driven by robust hiring in the leisure and hospitality sector, with 2.1 million jobs added, accounting for about 40 percent of the total gained for the month. Bars and restaurants added 1.5 million new jobs to payroll, coming in still about 3 million behind where they were before the pandemic.

"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 percent below pre-pandemic levels," Bunker said. "With virus cases spiking and businesses potentially closing once again, these gains in employment may not be sustainable moving forward."

These are the same industries being hit hard in the past two weeks by new closings, as rising virus cases shutter bars and restrict restaurant service in the states that reopened first.

Hiring in June was strong in nearly every sector of the economy, however, with gains made in retail (740,000 new jobs), manufacturing (356,000 new jobs), health care (358,000 new jobs) and professional services (306,000 new jobs).

"ManpowerGroup's real-time data also gives us cause for optimism—from June to July we've seen nearly a doubling of new jobs posted," said Becky Frankiewicz, president of ManpowerGroup North America. "We're seeing hiring for essential roles related to COVID-19 continue to transition to hiring that enables people and companies to adapt for our new future. Retail, including grocery, led all jobs available as markets reopened. We are also seeing promise in some significantly impacted sectors like hospitality improving from less than 1 percent of available jobs to 8.6 percent of available jobs, showing some Americans are starting to take advantage of eating out and other forms of leisure."

That's consistent with real-time hiring trends from Glassdoor's Job Market Report, "which shows strong hiring in June in travel and tourism, consumer services, arts and entertainment, and other sectors hit hard by the first wave of COVID-19 that began reopening last month in many states," Chamberlain said. "One powerful revelation from today's jobs report is how swiftly U.S. job growth can bounce back once officials give employers the green light on reopening," he added. "June's figures are a litmus test for how rapidly businesses can reopen once the nation finally brings the coronavirus under control—a reason for optimism in coming months."

Some sectors are still hurting, noted Julia Pollak, a labor economist at online employment marketplace ZipRecruiter. She said there are still many industries shedding jobs, such as state government (-25,000), nursing and residential care facilities (-20,000), local government minus education (-14,000), mining and logging (-10,000), travel and reservation services (-7,600), and air and rail transportation (-6,000).

The labor market has likely deteriorated even more by now, she added. "The number of new jobs posted on ZipRecruiter plummeted 51 percent in April, rose 14 percent in May, but declined in June, a sign that the hiring outlook remains deeply uncertain."

Unemployment Falls, Job Loss Still High

The official unemployment rate dropped to 11.1 percent from 13.3 percent but correcting for misclassification errors place it at about 12 percent, down from over 16 percent, according to the BLS. "That's an improvement, but still worse than the depths of the Great Recession," Wright said. "And with jobless claims stagnating at historic levels, there's little reason to expect a quick improvement any time soon."

He pointed out that the U-6 underemployment rate is at 18 percent, below the all-time high of nearly 23 percent in April but much higher than February's 7 percent. "And don't forget that labor force participation remains 3 million below what it was in February."

Despite signs of elevated layoffs, the decline in the unemployment rate is highly encouraging, Pollak said. "So is the 1.5 million decline in the number of people working part time for economic reasons. The number of workers on temporary layoff declined by almost 5 million, another strong sign of recovery. It suggests workers are being recalled to their jobs in large numbers."

But sadly, the number of permanent job losses also continued to rise, growing by 588,000, she said. "With so many people being permanently laid off at once, the labor market is becoming intensely competitive for job seekers."

Pollak said it's also important to remember that the unemployment figures don't capture the full extent of the pandemic's labor market disruption. "The labor force has declined by 4.6 million since February. It could take years for them to come back off the sidelines. Some have likely exited the labor force permanently. And the crisis has affected some groups of workers more severely. The unemployment rate for workers in service occupations is 19 percent. And while employment levels rebounded 3.8 percent for white workers and 6.3 percent for Hispanic workers, they only rose 2.4 percent for black workers."

Initial Jobless Claims Fall, Continuing Claims Rise

States reported that about 1.4 million U.S. workers filed for new unemployment benefits during the week ending June 27. First-time claims have fallen for 13 straight weeks since hitting a record 6.8 million in late March. The total number of workers continuing to claim unemployment benefits held at 19 million last week after peaking at nearly 25 million in early May.

"Continuing claims are a concerning signal that the recovery may not have enough economic momentum to bulldoze through any obstacles," said Daniel Zhao, Glassdoor senior economist. "The more timely unemployment insurance claims data signals the recovery is continuing sluggishly even as COVID-19 cases climb across the country, but the second wave of cases raises the specter of a second wave of economic disruption."

Another 12.8 million people continue to claim unemployment under the newly created Pandemic Unemployment Assistance program providing jobless benefits to workers previously not eligible for unemployment. "That means there are still more people filing claims each week than the number of jobs added all 2019," Pollak said.

Chamberlain said the employment reporting in July "could feel like Groundhog Day, if states reinstate shelter-in-place and business closures that'd result in higher unemployment and jobs losses."

Any losses would likely be smaller than April's freefall, however, "as states apply lessons and take a smarter, more targeted approach to the pandemic," he said.

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