The Bureau of Labor Statistics reported that 4.8 million jobs were added in June, and the unemployment rate fell to 11.3%. Expectations were for a gain of 2.9 million, and the unemployment rate to decline to 12.4%. Additionally, the May jobs report was revised higher by 200,000 jobs. Most of the job gains in June were in the hardest-hit industries like retail, hospitality, travel, restaurants, and education.
Despite the stronger than expected unemployment report, it's also important to note that the unemployment rate is higher than the worst levels of the Great Recession when it peaked at 10.4%. The survey was also taken in the middle of the month which means that the effects of recent orders shutting down certain establishments in states that are facing another wave of the coronavirus are not taken into account. A reflection of this development is 1.4 million people filing unemployment claims this week.
Core unemployment is a statistic that strips out temporary unemployment from the numbers and gives a much less "noisier" number. Based on this, the core unemployment rate has risen from 3.6% before the coronavirus in February to 5%. This figure has been increasing despite the gains in May and June for the headline figures.
Some Cautionary Notes
On the surface, the jobs report is a positive indication that the economy is healing and on the path to normalization. However, one important caveat is that much of the job gains were due to temporary layoffs ending rather than new workers being hired. And, it's uncertain whether many of these workers will be kept on the payroll.
Additionally, many Senate Republicans are citing improvements in the labor market and the strong stock market as evidence that further stimulus is not necessary whether that is extending unemployment insurance or extending help to state and local governments.
State and local governments are going to see huge drops in tax receipts. If they are forced to balance budgets, they will be forced to cut costs and lay off workers. This is at a time when they should be investing in public services to continue combating the coronavirus like testing and contact tracing.
One example is schools. Reopening schools is an important step for the economy to return to normal, but it's going to take additional measures like increased cleaning, temperature tests, social distancing, and some sort of rapid testing. Of course, all of these things cost money but over the long-term, it's much less than the cost of not opening schools and keeping the economy running at a sub-optimal level.
