Expected US job growth surge for June may not last

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WASHINGTON (AP) – US employers likely rehired several million more workers in June, reducing the unemployment rate to the level of depression, but the most recent data suggests that a resurgent coronavirus will limit further earnings.

Economists predicted that businesses, governments and non-profit organizations added 3 million jobs – a record high – and that the unemployment rate dropped by one percentage point to 12.3%, according to the FactSet data provider. The expected hiring gain would be 2.5 million jobs in May. Despite this, combined employment growth for May and June would recover only a fraction of the 22 million jobs lost in March and April, when the virus forced closings and layoffs of businesses across the country.

Even an unemployment rate above 10% would not fully capture the extent of the damage caused by the pandemic to the labor market and the economy. Millions more people work part-time but would prefer full-time work. And an unusually high proportion of workers suffered wage cuts, found.

With confirmed cases of coronavirus crossing the solar belt, there is a wealth of evidence to suggest that an emerging recovery is stagnating. In the states with the highest peaks of reported virus – Texas, Florida, Arizona and others – progress has reversed, with businesses closing again and workers losing jobs, in some cases for the second time.

California closed bars, theaters and restaurants inside most states on Wednesday. And the Arizona epidemic has gotten worse by almost all measures. Florida has closed some beaches.

Credit and debit card data tracked by JPMorgan Chase shows that consumers have slowed spending in the past week alone, after a steady increase in spending in late April and May. The reversal has occurred in both states that have experienced an increase in reported COVID cases and in less affected states, said Jesse Edgerton, economist at J.P. Morgan.

Nationally, card spending fell nearly 13% last week compared to a year ago. It was worse than the week before, when year-over-year card spending fell just under 10%.

Real-time data from Homebase, a provider of time tracking software for small businesses, shows that the number of hours worked in its client businesses stabilized after increasing sharply in May and early June. Business reopens have also flattened. The economic rebound produced by the initial lifting of the closure orders may have run its course.

However, Thursday’s job report will be based on data collected during the second week of June, so it will likely reflect an improvement in the hiring trend. Last week’s hours worked plateau will instead affect July’s employment figures, which will be released in early August.

“Whatever the job report looks like, things have gotten worse since,” said Julia Pollak, labor economist at ZipRecruiter.

In addition to renewed closings across the sunbelt, New York City has postponed plans to reopen seating inside restaurants in the face of confirmed virus cases. Such moves cause a new wave of layoffs or limit future hiring.

McDonald’s has suspended its reopening efforts nationwide. And Apple has announced the closure of 30 other US stores, in addition to the 47 it had already closed for the second time.

Economists have long warned that the economic benefits of reopening businesses will prove short-lived if the virus is not brought under control. Until most Americans feel confident enough to dine, travel, shop or get together as a group without fear of infection, restaurants, hotels and retailers will not have enough requests to justify rehiring all of their former employees.

“The way forward for the economy is extremely uncertain and will largely depend on our success in containing the virus,” Federal Reserve Chairman Jerome Powell told a committee of the House this week. “A full recovery is unlikely until people are convinced that it is safe to re-engage in a wide range of activities.”

Nevertheless, some bright spots in the economy may appear in Thursday’s jobs report. Manufacturers expanded in June after three months of decline, the Supply Management Institute, a professional group, announced on Wednesday. New orders are pouring in and factories are adding more jobs, said ISM.

In addition, unprecedented mortgage rates are encouraging more buyers. Purchases of new homes increased sharply in May. And a measure of contracts signed to buy existing homes jumped to a record high in May, indicating that sales are expected to rebound after falling for three consecutive months.

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