July 2, 2020
Executive Summary: US employers added a record 4.8 million jobs in June, while the unemployment rate slipped to 11.1%. US firms have clawed back 7.5 million of the 22.2 million jobs lost in March and April. While we believe a self-reinforcing upswing has begun, whereby furloughed workers are being recalled as some activities restart, the process of repairing the employment situation will take many months.

Longer-Term Trend

US nonfarm payrolls rose by 4.8 million in June, more than 2.1 million above the previous all-time record monthly increase set during May. Revisions to the prior two months added 90,000 more workers to the previously reported totals. The April figure was revised down by 100,000, to -20.8 million from -20.7 million, but the May tally was revised up by 190,000, to 2.7 million from 2.5 million.

Once again, the number of unemployed persons reported as a temporary layoff was 10.6 million in June, down by 4.8 million, while permanent job losses rose by 588,000 to 2.9 million in June.

Labor Force and Unemployment

The unemployment rate declined by 1.2 percentage points to 11.1% in June from 13.3% in May. The all-in unemployment rate (U-6) also fell, down 3.2 percentage points to 18.0% in June. The labor force added 1.71 million workers, pushing the total workforce up to 159.9 million. The labor force participation rate rose to 61.5% in June from 60.8% in May.

Industry Trends

Service-providing industries added 4.3 million workers, while goods producers added 504,000 workers. While the increases were broad based, the leisure & hospitality segment accounted for nearly half of the June job gains. Just one segment—mining & logging—sustained job losses in June, half of which were mining support activities and another quarter were oil & gas support jobs.

The beleaguered leisure & hospitality segment has recovered almost one-third of the workers lost since February, although it is still down more than 4.8 million for the March to June period (see chart below). Once again, the biggest gains were achieved by restaurants and bars, which hired 1.48 million, slightly more than in May. Hotels finally added workers, up 238,600, as did the performing arts & entertainment sub-industry, which added 365,900 primarily by amusement parks, gambling and other recreation industries.

Other services, which is not considered one of the 10 major segments, added a notable 357,000 workers. The bulk of the gains (264,000) were within personal and laundry services, which includes hair/barber/nail/skin care establishments.

Government snapped a three-month streak of sharp declines. A surge of local non-education job gains, up 70,000, masked continued losses within education, evenly split between the local and state levels. Local education lost 14,000 positions, while states cut 19,000 educational positions. Federal-level payrolls were basically flat (added 1,000).

Now, 9 of the 14 industry segments are cumulatively down less than 1 million workers for the March to June period. Still, many industries have a long way to go, especially leisure & hospitality.

Bottom Line

We are encouraged by the swift improvement in the labor market, which reflects the reopening path and support programs by the Federal Reserve and federal government. Our optimism is tempered by the reality that there will be bumps in the road as the pace of reopening will be hindered by inevitable infection spikes and reopening setbacks. While we believe a self-reinforcing upswing has begun, whereby furloughed workers are being recalled as some activities restart, the process of repairing the employment situation will take many months. Moreover, some jobs are permanently lost and will not return since they were not predicated on reopening. It will take time for those workers to find other employment.

We continue to use the quote by Richmond Fed President Tom Barkin, “The economy took the elevator down to the basement, but is taking the stairs back up.” We believe this analogy encapsulates the rapid, compressed timeframe of the recession, and the longer recovery we expect. Indeed, there will be a lot of huffing and puffing, and it will feel like a much longer journey on the way back up.

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