The recall of workers to their jobs slowed in July as evidence of a much greater problem in the domestic labor force mounts.
The July data implies that 12.88 million of the 22.1 million jobs lost in March and April have yet to return
While the change in total employment of 1.763 million reported by the Labor Department on Friday exceeded the consensus forecast of a 1.4 million gain, that implies that 12.88 million of the 22.1 million jobs lost in March and April have yet to return. That also implies that the total level of employment is 8.4% less than it was just five months earlier.
We take no comfort from this data given the move sideways in the U.S. economy since mid-June, and we are confident that the further recall of workers back to the labor force will fizzle in the August report.
Any notion that the improvement in the top line provides a convenient excuse for policymakers to avoid hard decisions around a fifth round of fiscal aid aimed at the unemployed should be summarily dismissed.
We are in the midst of the greatest employment crisis since the Great Depression. A case of fiscal fatigue at this juncture will create the conditions for another possible downturn given the downward direction of the data over the past two months.
The number of involuntary part-time workers — those who would have preferred full-time work or were working part-time because their hours were reduced or were unable to find full-time jobs — remains 4.1 million higher than in February.
The number of people who usually work part-time increased by 803,000 to 24 million, while the number who usually work full-time was little changed at 119.5 million. The employment-to-population ratio remains near historical lows at 55.1%, and the labor force participation rate modestly declined to 61.4%.
For these reasons, the underemployment rate stands at 16.5% in contrast with the official unemployment rate of 10.2%. The median duration of unemployment has increased to 15 weeks from 9 weeks in February.
The average duration of unemployment is now at 17.9 weeks and is poised to increase as the pace of recovery slows in both the labor market and overall economy. Total private hours worked declined by 0.3% for the second straight month to 34.5 hours worked.
The magnitude of monthly labor flows remains staggering as the economy continues to adjust to the evolution of the pandemic. The change in household employment increased by 1.35 million, following the increases of 4.9 million and 3.8 million over the past two months.
During the fifth month of the crisis, the industries that are going to lead any recovery once a vaccine has been found saw modest increases of 26,000 in manufacturing, 39,000 in goods producing and 20,000 in construction. Leisure and hospitality saw a 592,000 increase; trade and transport 291,000; education and health 215,000; and business services 170,000 — all of which accounted for the majority of the 1.42 million increase in the service sector.
Government hiring increased by 300,000, but that belies a loss of nearly 1.1 million jobs since February. Moreover, given the precarious condition of state and local balance sheets, these are the jobs one would expect to be at risk should talks directed at another round of fiscal aid falter or not include a significant volume of cash to plug the holes in those balance sheets.
The collection rate for the establishment survey — which had a longer-than-average collection period in July — was 78%, higher than the average for the 12 months ending in February 2020.
The household survey response rate was 67%, up from the rate of 65% in June but much lower than the average rate of 83% for the 12 months before the pandemic.
For March through June, the Bureau of Labor Statistics published an estimate of what the unemployment rate would have been had misclassified workers been included. Repeating this same approach, the overall July unemployment rate would have been about 1 percentage point higher than reported.
Finally, the BLS will issue its 2020 preliminary benchmark revision to the establishment survey on August 19. The Quarterly Census of Employment and Wages, derived from state unemployment insurance tax records that almost all employers are required to file, is the data that underscored the benchmark revision. The final benchmark will be issued with the publication of January 2021 Employment Report.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
