U.S. Adds Jobs Amid Cloudy Outlook: The jobless rate fell to 11.1% in June as the U.S. regained 4.8 million jobs, but a recent coronavirus spike could hamper the labor market’s recovery.
(…) Still, the U.S. labor market is operating with about 15 million fewer jobs than in February, the month before the pandemic struck the U.S., while the country faces an increase in coronavirus cases that has led some states and businesses to change course on reopenings. (…)
Thursday’s jobs report, which is based on survey data largely collected in mid-June, doesn’t reflect those recent government-mandated business closures and related layoffs. (…)
Job gains in leisure and hospitality—a sector hard hit by the shutdowns—accounted for about 40% of June’s employment growth. Restaurants and bars were the main driver. But those workers are particularly vulnerable to renewed layoffs because a recent rise in cases in several states is causing governors to halt or roll back reopenings. (…)
Unemployment claims have come down from a peak of nearly seven million in late March but have stabilized near a historically high 1.5 million, an indication that companies continue to cut jobs. (…)
Meanwhile, the number who permanently lost their jobs rose by about 600,000 over that period. (…) (WSJ)
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GOP Divided Over New Stimulus Round Trump, GOP weigh additional direct payments to households amid new concerns about pandemic and economic recovery
(…) When the Senate returns to Washington on July 20, it will have just a matter of weeks to negotiate and pass a new bill before expanded unemployment insurance benefits expire on July 31 and the Senate begins another scheduled recess on Aug. 7. (…) “There’s a lot of discussion internally about that and there isn’t any consensus yet,” said Sen. John Cornyn (R., Texas).
President Trump, who cheered the drop in the unemployment rate to 11.1% in June from 13.3% in May, has said he supports another round of stimulus checks to individuals, but hasn’t offered details. Treasury Secretary Steven Mnuchin said Thursday the administration will “seriously consider” additional direct payments. (…)
But many other Republicans on Capitol Hill see the new employment numbers—which some economists caution don’t capture the impact of coronavirus spikes and some business re-closures at the end of June—as evidence against the need for major new spending. Several GOP lawmakers said they didn’t yet support the president’s push for another round of checks to individuals. (…)
Additional economic data released over the first half of July will also shape how Republicans act. Sen. Marco Rubio (R., Fla.) said Thursday’s job report is likely an incomplete picture of what the economy looks like. (…)
And so will additional elections polling…
Workers are getting laid off for a second time, as the virus’s surge puts reopenings on hold
The number of permanent job losers continued to rise, increasing by 588,000 or 25% to 2.9 million in June while the unemployment rate remains a chunky 7.6 percentage points above its February level. Fathom Consulting explains:
The unemployment report also underlined how the current environment remains significantly worse than previous recessions. As unemployment soared, almost all of those who had lost their job reported being ‘on temporary layoff’. So far, unemployment among this group has dropped from 18m to 11m while the number of people who report being ‘permanently laid off’ has actually increased by 1.6m since February with a +600k number in June after +300k in May. The bottom line is that there is a high risk of these ‘temporary’ lay-offs becoming crystallised into permanent ones particularly as generous government income support programmes are tapered over the coming months.
Obviously, as businesses reopen, employment recovers. But not all businesses have reopened or will reopen and those who will may well need fewer employees until final demand actually recovers near pre-pandemic levels. This chart shows the infamous “V” for employment, still a work-in-progress with 14.7 million fewer people working, while continuing unemployment claims balk at displaying a clear inverse “V”, seemingly stalled around 20 million. Numbers don’t necessarily jibe because of different surveys but the employment “V” is far from being confirmed by the unemployment “V”.
New manufacturing orders’ “V” is also unconfirmed by orders backlog…
…also observed globally, which includes China, Asia and Europe which have all deconfined earlier than the U.S.:
This chart from Fathom Consulting shows the depth of the current employment crater:
The bulk of job losses are in Services so it is natural to see a meaningful recovery as restaurants, bars and other services reopen. But we all know many will never reopen and most which will will need fewer staff for quite a while. OpenTable data show that as of July 1, restaurant reservations were still down 65% YoY. And CalculatedRisk shows that hotel occupancy is barely above 40% compared to a normal 70% at this time of the year.
- American Airlines could have over 20,000 excess employees Group says it aims to ‘right-size’ workforce to address drop in customer traffic amid pandemic
Fed official warns COVID-19 bankruptcies could trigger a financial crisis
St. Louis Federal Reserve Bank president James Bullard has warned that a growing number of bankruptcies due to the coronavirus outbreak could lead to a financial crisis, the Financial Times reported.
“Without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and [that] could feed into a financial crisis,” Mr. Bullard said in an interview with the newspaper on Wednesday. (…)
Fathom Consulting adds:
With political uncertainty on the rise and many government programmes set to be slowly tapered off, the risks to the corporate sector appear to be just in the very first innings. For example, the chart below shows that US bankruptcies trends follow the US output gap (derived from the HLBW methodology) with a four-quarter lag.
VIRUS UPDATE
- As new cases rise in Washington state, Gov. Jay Inslee said he would pause a phased reopening for all counties for two weeks. He also announced a statewide directive for businesses to require face coverings of all employees and customers.
- Chicago issued an emergency travel order requiring all visitors from 15 states to quarantine starting on Monday. Pennsylvania state officials issued a similar travel advisory.
- The percentage of occupied intensive-care-unit beds in Arizona, another hot spot, remained at a high of 89% for a second day. On Thursday, the state reported nearly 3,300 new cases, for a total of 87,425. More than 10% of its daily tests were positive.
- Only a dozen states, mostly in the Northeast, have managed to keep new case levels flat or declining.
- The spread of the virus is still worsening in almost every state; only Vermont, New Hampshire, and New Jersey (3% of the population) now meet all four recommended federal gating criteria. Now hospitalizations are rising nationally as well, and COVID-19 patients occupy 1.5pp more of nationwide hospital capacity compared to two weeks ago. 5 states representing 15% of the population– Arizona, Florida, South Carolina, Nevada, and Georgia– are meeting none of the federal criteria for reopening, and another 11 states (24% of the population) meet just one. Conditions in the state of Nevada continue to worsen, with the estimated effective reproductive number Rt at a very high 1.5 and available hospital capacity already low.
- Mexico, which does the least amount of testing of any major country, posted its largest daily increase with 6,741 new cases. Mexican government officials say because testing is limited, a more accurate reflection of new cases would require multiplying by roughly eight.
- In India, new cases rose by 20,903, a single-day record, raising the total tally of infections to 625,544, according to data from the Health Ministry. India has so far reported a total of 18,213 deaths. As cases continue to rise, the government has extended lockdowns in areas with high caseloads through July.
- Boris Johnson, Britain’s prime minister, who said earlier this week that it was Britons’ “patriotic duty” to go to the pub when they reopen on Saturday, has now urged people not to “overdo it.” His warning came after tens of thousands have flocked to beaches, organized illegal music parties and violated social-distancing rules in recent weeks.
How Beijing’s second Covid-19 wave knocked its business recovery off course Beijing’s thousands of small and midsized companies face renewed uncertainty as the 21 million-strong capital works to douse its new coronavirus hotspot. Private business owners from across the city’s ailing service sector said the return of disease controls has prolonged slumps in revenue, wilted recoveries and deepened fears of bankruptcies.
Hospital, ICU visits drop as cases become less severe in Canada In the last week 2,149 new cases were announced, 11 per cent fewer than the previous week.
“The crisis is being handled,” Mr. Trump said yesterday.