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US unemployment falls to 11%, but new shutdowns are underway

Published: Jul. 2, 2020 at 6:12 AM EDT|Updated: Jul. 2, 2020 at 3:31 PM EDT
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WASHINGTON (AP) — U.S. unemployment fell to 11.1% in June as the economy added a solid 4.8 million jobs, the government reported Thursday. But the job-market recovery may already be faltering because of a new round of closings and layoffs triggered by a resurgence of the coronavirus.

While the jobless rate was down from 13.3% in May, it is still at a Depression-era level. And the data was gathered during the second week of June, just before a number of states began to reverse or suspend the reopenings of their economies to try to beat back the virus again.

"This is a bit of a dated snapshot at this point," said Jesse Edgerton, an economist at J.P. Morgan Chase.

The news came as the number of confirmed infections per day in the U.S. soared to an all-time high of 50,700, more than doubling over the past month, according to the count kept by Johns Hopkins University.

The spike, centered primarily in the South and West, has led states such as California, Texas, Arizona and Florida to re-close or otherwise clamp down again on bars, restaurants, movie theaters, beaches and swimming pools, throwing some workers out of a job for a second time.

President Donald Trump said the jobs report shows the economy is "roaring back," though he acknowledged there are still areas where "we're putting out the flames" of the virus.

Economists expect the recovery to take longer than Trump's optimistic projections, with the unemployment rate likely to be near double-digit levels by year's end.

"Even as we move into the second half of the year, a large number of people will still be looking for work," said Eric Winograd, senior U.S. economist at asset manager AllianceBernstein.

The shutdowns over the past two weeks will be reflected in the July unemployment report, to be released in early August.

While the job market improved in June for a second straight month, the Labor Department report showed that the U.S. has recouped only about one-third of the colossal 22 million jobs lost during the lockdowns this spring.

Layoffs are still running high: The number of Americans who applied for unemployment benefits fell only slightly last week to 1.4 million, according to another report. Though the weekly figure has declined steadily since peaking in March, it is still extraordinarily large by historic standards.

And the total number of people who are drawing jobless benefits remains at a sizable 19 million.

U.S. job growth in June was driven mainly by companies recalling workers who had been laid off during the widespread business shutdowns across the country.

In an ominous trend contained in the Labor Department report, the number of Americans who said they had lost their jobs permanently rose by 600,000 last month to nearly 2.9 million.

Many businesses — particularly small ones — are shutting down for good even though the lockdowns have been largely lifted.

Erik Hurst, an economics professor at the University of Chicago, said many restaurants, bars and gyms can't survive by operating at half-capacity, and customers are going to be cautious until there is a vaccine.

"We don't want to get our hair cut as much as we used to," Hurst said. "We don't want to go out to eat out as much as we used to."

Fred Wellman's five employees are getting their final paychecks Friday as he closes down his public relations firm. He was able to get a small-business loan from the government, but it wasn't enough.

He usually drums up most of his business at conferences, seminars and other in-person events. But "if people aren't meeting in person, if people aren't holding events, you don't get a chance to mingle," he said.

The job gains of the past two months have partly resulted from unprecedented levels of government spending, including $1,200 stimulus checks, more than $500 billion in grants to small businesses, and an extra $600 a week in unemployment benefits.

Those payments enabled millions of Americans to cover the rent and other bills. Yet those programs are expiring or tailing off. The additional $600 in unemployment ends July 31.

"We could see a huge cliff," said Julia Pollak, labor economist at ZipRecruiter. "Those expanded benefits will expire before new hiring has really picked up."

Congress is debating another relief package. Treasury Secretary Steven Mnuchin said Thursday he supports something that is "much more targeted" to businesses that need it.

Hotels, restaurants, bars and casinos added 2.1 million jobs last month, the most of any industry. Retailers gained 740,000.

While unemployment fell in June for all groups, it dropped faster for whites than for Blacks or Latinos. The rate among white people was 10.1%. Black unemployment fell to 15.4% from 16.8%. Among Latinos, unemployment dropped to 14.5% from 17.6%.

The number of laid-off workers seeking unemployment benefits rose last week in Texas, Arizona and Tennessee. It fell in California, but was near 280,000. That's more than the number of people who were seeking jobless benefits in the entire country before the outbreak took hold in March.

McDonald's has paused its reopening efforts nationwide, and Apple is re-closing scores of its stores in the United States. Credit and debit card data tracked by JPMorgan Chase shows that consumers reduced their spending last week after having increased it steadily in late April and May.

Economists have long warned that the economic benefits of allowing businesses to reopen would prove short-lived if the virus wasn’t brought under control and people didn’t feel confident enough to dine out, travel and shop.

Copyright 2020 Associated Press. All rights reserved.

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