Employers brought back millions more workers in June as businesses began to reopen across the country. But the recent surge in coronavirus cases is threatening to stall the economic recovery long before it has reached most of the people who lost their jobs.
U.S. payrolls grew by 4.8 million in June, the Labor Department said Thursday. It was the second month of strong gains after April’s huge losses, when businesses laid off or furloughed tens of millions of workers as the pandemic put a large swath of economic activity on ice.
The job growth surpassed economists’ forecasts, and it was broad based, cutting across industries and demographic groups.
But the thaw is far from complete. There were still nearly 15 million fewer jobs in June than in February, before the pandemic forced businesses to close. The unemployment rate fell to 11.1 percent in June, down from a peak of 14.7 percent in April but still higher than in any previous period since World War II. The rate would have been about one percentage point higher, the Labor Department said, had it not been for persistent data-collection problems.
Unemployment rate since 1948
In an appearance at the White House on Thursday morning, President Trump hailed the numbers as “spectacular news for American workers and American families and for our country as a whole.”
The monthly jobs data was collected in mid-June, before coronavirus cases began to spike in Arizona, Florida and several other states. More timely data, also released by the Labor Department on Thursday morning, showed that 1.4 million Americans filed new claims for state unemployment benefits last week — the 15th straight week that the figure exceeded one million — and 840,000 others filed for benefits under the federal Pandemic Unemployment Assistance program.
With the resurgence of the virus adding new volatility to the outlook, economists fear that layoffs could accelerate now that states have begun ordering some businesses to close again. And they warn of another looming threat: the expiration of government assistance, in particular the enhanced unemployment benefits providing an extra $600 per week to laid-off workers. Without congressional action, those benefits will cease at the end of this month, potentially eliminating a key source of support not just for the workers but for the broader economy as well.
The Congressional Budget Office said Thursday that it expected the economy to grow rapidly in the next six months but still wind up nearly 6 percent smaller than it was when the year began.
“We’re in a very deep hole, and we just set ourselves back again,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “It’s difficult to climb out of that hole.”
The H.Wood Group, which operates a dozen bars, restaurants and nightclubs in the Los Angeles area, had just begun to dig out of that hole when the latest round of shutdown orders hit. The company spent weeks figuring out how to operate safely, installing plexiglass dividers between banquettes, eliminating reusable menus and adopting policies like temperature checks at the door and mandatory masks.
In June, that work appeared ready to pay off: Two of the company’s restaurants reopened, and three bars were set to reopen this week. Customers, eager to eat out after weeks of lockdown, snapped up reservations.
“The first two nights were a little weird,” as people adjusted to masks, face shields and temperature checks, said John Terzian, the company’s co-owner. “But after Night 3, I think people settled in, and honestly it felt perfect.”
Then on Sunday, Gov. Gavin Newsom ordered Los Angeles County bars to shut down; on Wednesday, he ordered restaurants to suspend dine-in service as well. Mr. Terzian, who had brought back roughly half his 400-person work force and was on track to bring back the rest, instead had to start telling people they were out of work again.
And while H.Wood is financially stable, he said, he will be slower to reopen next time, lest the authorities pull the rug out from under him.
“I think we would be really hesitant,” he said. “Staying shut we understood, but reopening and reshutting is just wrong.”
Economists say stories like Mr. Terzian’s drive home a central fact of the crisis: The economy can’t truly recover until the pandemic is under control.
“The virus drives the economics,” said Betsey Stevenson, a member of the Council of Economic Advisers under President Barack Obama who is now at the University of Michigan. If cases continue to rise, as health officials warn, “we’re not going to have people going back to work,” Ms. Stevenson added.
“In fact, we’re going to see more people staying home,” she said.
Total employment has grown the past two months because companies have begun recalling temporarily laid-off workers. But layoffs have continued as the economic effects of the pandemic ripple through the economy, reaching businesses and industries that were spared earlier.
The number of people reporting they had permanently lost their jobs rose in June even as the number of workers on temporary layoff fell sharply for the second consecutive month. And the share of Americans out of a job for 14 weeks or less fell in June, while the share unemployed longer continued to rise — another sign that while short-term job losses are abating, more enduring damage lingers.
“We’re going on four months now,” said Olugbenga Ajilore, a senior economist at the Center for American Progress, a progressive group. “There’s only so long that these businesses can hold out before it just doesn’t become feasible.”
The rebound in jobs has not been shared equally across groups. The unemployment rate for white workers has fallen more than four percentage points over the past two months, to 10.1 percent. For Black workers, the rate has fallen just over one point, to 15.4 percent, and the rate for Black men actually rose in June. Asian workers, too, have seen only small gains. Latinos, hit particularly hard when the pandemic shut down much of the service sector, have had a larger drop in unemployment, but their jobless rate remains elevated at 14.5 percent.
The good news is that the strong job gains in May and June suggest that the permanent economic damage so far has been relatively limited, in part because of the trillions of dollars of emergency spending authorized by Congress. June’s gains were concentrated in industries like restaurants and retail that were battered in the first phase of the pandemic, but construction, manufacturing and professional services brought back workers as well.
Industries are rebounding, but none have fully recovered
Cumulative change in jobs since June 2016, by industry
Assessing the scope of the pandemic’s nationwide economic damage has proved difficult, with varying estimates of the number of people out of work. Some 30 million were collecting either state or federal unemployment benefits as of mid-June, for example, a figure roughly double the 15 million payroll jobs lost since March.
Economists say the gap is partly explained by differences in what the two sources measure: The monthly payroll figures include only employees, not independent contractors and self-employed workers, who can receive federal unemployment benefits under the emergency programs created by Congress. But unemployment offices have also been troubled by backlogs and data-collection issues, and some states say they have been double-counting people filing for federal benefits. A rough reconciliation of the various sources suggests that roughly 25 million people were still out of work because of the virus in mid-June.
Michael Gapen, chief U.S. economist at Barclays, said that whatever the caveats, Thursday’s report was an encouraging sign that the job market was gaining ground before coronavirus cases began to surge again.
“It was a very strong month in the labor market, and the reopening of state economies has led to sizable re-employment,” he said.
Hand & Stone, a national chain of massage studios and facial spas, survived the shutdown more or less intact. By Monday, 420 of its 465 locations had reopened, with 35 more expected to do so by the end of this month. Only a handful of locations have closed permanently. And about 70 percent of members continued paying monthly dues during the shutdown, banking massages for the future rather than canceling their contracts.
Todd Leff, the company’s chief executive, said that so far, at least, customers seemed comfortable going back, in part because of strict safety procedures the company had put in place. Sales at open locations are about 22 percent below where they were a year ago, and close to 80 percent of workers at those locations are back on the job. But Mr. Leff said he was still cautious about the longer-run prospects.
“I see a quicker recovery than I think others are projecting and, at least in my industry, less businesses closing permanently,” he said. “But if it goes another 60 days, that could change.”
With so much uncertainty, many employers are remaining cautious. Nearly 150,000 of the positions created in June were temporary jobs.
“We’re seeing hesitancy on the part of employers to make permanent job offers,” said Amy Glaser, a senior vice president at the staffing firm Adecco.
For those still out of work, the job market remains daunting, particularly for those laid off early in the pandemic, who have now been out of work for months. Juliana Jacobs was let go as a designer of women’s tops at New York & Company in late April and has seen scant openings since then.
“Most of my friends in design have been laid off or furloughed,” she said. “I know very few who are working or have been brought back.”
Ms. Jacobs, who lives in New York City, has taken the time to update her LinkedIn profile, along with her portfolio and résumé. She applied for unemployment benefits in late April but hasn’t been able to get through after her file was marked “pending” on the New York State Department of Labor website.
“There really isn’t anything out there right now,” she said. “Most businesses are either just beginning to reopen or reopening with a reduced staff.”
Jeanna Smialek and Jim Tankersley contributed reporting.