Total employment increased by an encouraging 4.8 million workers in June as the U.S. economy continues what will be a multiyear period of recovery in the American labor market.
Now is not the time to pull back aid to those out of work.
The major takeaway from the array of labor market data published Thursday morning is that despite the decline of 7.5 million people on temporary layoff in May and June, through June 13 there were 31.49 million on some form of unemployment insurance, with an additional 2.9 million added since.
The major concern is that the headlines will lead some to conclude that it is time to close the door or pull back aid to those out of work. In our estimation that would be a serious policy error that would put in jeopardy a nascent recovery that we think is in play.
The combination of near real-time data in everything from job postings to restaurant reservations over that past two weeks implies that the reversal of re-openings and increased pace of infections will likely cause the recall of workers to slow or even lead to an increase in joblessness this fall.
As the economy heads toward a July 31 fiscal cliff with the expiration of Pandemic Unemployment Assistance, the broad collection of employment data strongly implies that not replenishing unemployment benefits would result in a sharp decline in household consumption in late summer and early fall, just before the November U.S. election, despite the relatively encouraging data in the monthly employment report.
The unemployment rate declined to 11.1% and the underemployment rate fell to 18%. The unemployment rate fell by 2.2% as the number of unemployed people declined by 3.2 million to 17.8 million. There were notable job gains in leisure and hospitality, retail trade, education and health, manufacturing and professional business services.
The technical issues in estimating the large job losses over the past five months continue. The household survey response rate was 65%, down 18% below pre-pandemic collection rates. The collection rate on the establishment survey in June was 63%, also well below the pre-pandemic rate.
The Bureau of Labor Statistics indicated that had the collection rates been at pre-pandemic rates, the unemployment rate would likely be 1% higher than the official estimate.
While the BLS has closed the gap on the error bands in the estimate, I am still somewhat skeptical that we have a clear and accurate picture of the true level of employment or the damage to the labor market wrought by the pandemic.
The number of individuals facing permanent job losses increased by 588,000 to 2.9 million in June, while the median duration of unemployment increased to 13.6 weeks. Those working part-time for economic reasons declined by 1.6 million to 9.1 million in June, more than double its February levels.
Initial claims for unemployment benefits continued to decelerate in the last week of June, with initial jobless claims falling to 1.427 million, a drop of 55,000 from the prior week. That deceleration is likely to continue in the current week, but we could expect a pickup as the governors of the states hardest hit by the recent surge in coronavirus infections re-impose social distancing measures and close or limit labor-intensive retail and hospitality establishments.
Continuing claims for unemployment benefits increased to 19.3 million in the week ending June 20 from 19.2 million in the prior week, for an implied “Insured” unemployment rate of 13.2%.
Through the week ending June 13, there were 31.49 million people on some form of unemployment insurance and another 2.9 million who applied for aid in the following two weeks.
While the top-line data illustrates an increase of 4.8 million in total employment, which is encouraging, there is still some ways to go until this data is aligned with the sheer volume of those out of work and experiencing a loss of income.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.