June Jobs Numbers Showed Big Growth. But Recent Weekly Unemployment Claims Data Is Worrisome.
According to new jobs data released today by the US Labor Department, total nonfarm employment grew by 4.8 million in June (seasonally adjusted). The gain was even larger (5.1 million) in non–seasonally adjusted totals.
June's unemployment rate was 11.1 percent, a drop of 2.2 percent.
This means total employment is now "only" 14.6 million below the November peak, meaning the US is now back to where total employment was in 2015.
As we can see in the first graph, so far a "V-shaped recovery" looks possible. In April, employment crashed by the largest amount seen since the Great Depression. The economy recovered more than 3 million jobs in May in addition to June's 4.8 million jobs.
But it remains unclear if the current job recovery will continue at the same rate. In June it looked like government-imposed business closures might be disappearing, but by late June state governors and other policymakers had begun announcing or threatening new business closures and lockdowns. This will no doubt have an effect on employment in July, but the extent of the effect is impossible to predict at this time.
If the recovery continues at its current rate, then total employment could recover within a few months, making the 2020 recession (at least in terms of jobs) considerably shorter than the Great Recession. Here is total employment (by recession and final month in each cycle before job losses began) indexed to peak month, and the number of months that passed before employment returned to peak levels:
In recent weeks, however, unemployment claims have remained stubbornly flat. For the week ending June 27, new unemployment claims increased by 1.43 million. This was only down slightly from the previous week, when there were 1.48 million new claims. Since March, new unemployment claims have totaled over 48 million.
That 1.43 million number for last week remains very large. During the Great Recession, new unemployment claims peaked at around 660,000 in late 2009. So long as unemployment claims continue to number above a million, we're looking at job losses well above what would be considered "normal" even in a recession.
Moreover, continuing unemployment claims actually increased slightly from the week ending June 13 to the week ending June 20, climbing to 17.9 million.
If unemployment claims continue to move sideways, there's good reason to suspect employment in July may do the same.
At the same time, the unemployment rate could continue to fall if workforce participation continues to fall. As people leave the workforce, the unemployment rate could theoretically fall even without any job growth.
And workforce participation is indeed falling. In April of this year, participation (for all ages) fell to about a 43-year low, coming in around where it was in April 1976. Participation climbed again in May and June, but remains near a forty-year low for June.
The weak jobs market appears to be most impactful on young workers and old workers, as workforce participation in prime earnings years has not been as affected. For workers in the 25–54 category, workforce participation is back to where it was in 2015.
Unless we start to see a more rapid drop-off in unemployment claims, it's difficult to see how a V-shaped recovery will continue. Moreover, much will depend on how harsh ongoing business closures and partial "lockdowns" are in the US. Since these policies are set at the state level, employment numbers will likely be very uneven from state to state. As we saw in the state-to-state data for May, many states with particularly harsh lockdowns, such as New York and Michigan, were among the states with the highest unemployment rates.