COVID-19 Unemployment Still Elevated but Mostly Temporary

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Economic Report Monitor #58
August 7th, 2020

Following the disappointing number on Wednesday, the Bureau of Labor Statistic's official report of the employment situation came out today. In a similar fashion, the BLS report showed a slower recovery in July as only 1.8 million jobs were added with the unemployment rate falling just 0.9% to 10.2%. While this beat expectations of about 1.6 million, it confirmed that a V-shaped recovery in the labor market is unlikely to materialize.

From MarketWatch

The number of unemployed individuals dropped by just 1.4 million to 16.3 million but is still up by about 10.6 million since February. Most of the COVID-19 losses remain as the number of individuals that have been jobless for 15 to 26 weeks rose by 4.6 million to total 6.5 million. Fresh job losses that occurred in the last 5 weeks are about 3.2 million, with just 364,000 added in July, suggesting the contraction in employment has slowed significantly.

Most of the job additions were temporary layoffs which fell 1.3 million to 9.2 million. Permanent job losers and reentrants to the labor force were virtually unchanged at 2.9 million and 2.4 million. These jobs that are being added are most likely not new positions generated to increase capacity but instead are positions that were vacated when capacity was reduced by COVID-19. This is slightly more optimistic as hypothetically these job gains should be easier to make as there shouldn't be the extra steps of discovery and training in the hiring process for these individuals. Additionally, there hasn't been a large shift in the data suggesting these temporary layoffs have become permanent.

On a more pessimistic note, 301,000 of the jobs added in July were government employment accounting for 16.7% of the overall increase. The report also says that this increase is unusual as public-sector education employment typically declines in July, and the gain was only a result of those declines coming earlier because of COVID-19. Sectors impacted by COVID-19 the most again added the most in July with leisure/hospitality up 592,000 (food services and drinking places up 502,000) and retail trade up 258,000.

Despite the weakness of the jobs report, the renewal of coronavirus relief still remains in question as Democrats hold firm on their demands in the deal. Markets were relatively apathetic about the report and the delay on the relief bill as the DJIA and the S&P 500 were mostly flat. Only the Nasdaq, which has outperformed lately, sold off, down about -0.87%. Nervous investors may have been calmed by the report that Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows will recommend that relief be renewed through an executive order.

Other Reports:
  • Wholesale inventories fell -1.4% in Jun as sales dropped 8.8%. Inventory/sales ratios mostly return to normal compared to a year ago.

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