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U.S. Jobless Rate Fell to 11.1% in June

07/02/2020 | 10:53am

By Sarah Chaney

The jobless rate fell to 11.1% in June as the U.S. regained 4.8 million jobs, continuing a labor market rebound from the economic shock caused by the coronavirus pandemic.

Job growth in June followed May's payroll gain of 2.7 million and showed people are getting back to work faster than anticipated. 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. economy, and a recent coronavirus rise could hamper the job market's recovery.

The June unemployment rate was down from 13.3% in May, even though there were significantly more workers who were accurately counted as unemployed in June compared with previous surveys during the pandemic, according to the Labor Department.

The jobless rate is still at historically high levels. Until March, before the coronavirus drove the U.S. into a deep recession, the unemployment rate was hovering around a 50-year low of 3.5%.

Some states are reversing or pausing reopening plans as coronavirus infections surge in the South and West. 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.

Hiring last month was supported by business reopenings and government aid. States across the U.S. reopened restaurants, gyms and salons that had been shut for several weeks to contain the spread of the coronavirus. Small businesses that tapped federal loans through the Paycheck Protection Program continued to recall workers.

Job gains in leisure and hospitality -- a sector that was hard hit by the coronavirus shutdowns -- accounted for about 40% of June's employment growth. Restaurants and bars were the main driver. Those workers are particularly vulnerable to renewed layoffs because a recent rise in cases in several states is causing governors to halt or rollback reopening plans.

At the beginning of the pandemic, customer traffic declined and hiring froze at Teriyaki Madness, a Denver-based franchised restaurant chain.

"But then people kind of woke up and said, 'This could last for a while, '" said Michael Haith, the company's chief executive.

Consumers started ordering more online and driving in for curbside pickup of teriyaki chicken-and-rice bowls, helping boost same-store sales at Teriyaki Madness. Now the fast-casual chain is adding 10 stores that will need 25 employees each in positions such as cook, cashier and general manager.

President Trump celebrated the employment figures. "Our economy is roaring back," Mr. Trump told reporters at the White House, adding that he was "really happy."

Mr. Trump said voters should be wary of replacing him in the November elections, saying that doing so would hurt the economy. He played down economic threats from the increasing spread of coronavirus, which has forced states across the South and Southwest to shut down businesses and recommend wearing masks in public. "The crisis is being handled," Mr. Trump said.

Employers in sectors such as retail, health care and manufacturing added jobs in June. Companies recalled workers who were temporarily laid off due to the pandemic, helping drive down the number of unemployed Americans on temporary layoff by about 5 million from May to June. Meanwhile, the number who permanently lost their jobs rose by about 600,000 over that period.

"We're in the beginning of a slow recovery," said Marianne Wanamaker, a labor economist at the University of Tennessee, who previously served as an economist in the Trump administration. "I think the recovery will stall out if we don't get control of the virus."

The number of new applications for jobless benefits fell by 55,000 to 1.43 million last week, the Labor Department said in a separate report Thursday. Unemployment claims have come down from a peak of nearly 7 million in late March but have stabilized near a historically high 1.5 million, an indication companies continue to cut jobs.

States where the coronavirus is spreading the most are experiencing a slowdown in economic activity, investment-banking firm Jefferies said at the end of June. The number of hours worked at small businesses hit its most recent peak in mid-June and dropped off in places including Texas and Arizona, data from scheduling and hiring software provider Homebase showed.

In recent days, Texas required that bars close and Florida imposed new restrictions on bars. New York Mayor Bill de Blasio announced that the city would delay the planned reopening of indoor dining at restaurants.

"The big picture is this is still an emergency," said Lisa Cook, an economics professor at Michigan State University. "There are small businesses and other businesses that are permanently closing."

Tubing rental company Texas Tubes won't be open to send customers floating down the 2-mile Comal River this Fourth of July weekend -- normally one of the busiest times of the year for the New Braunfels, Texas, company.

Last week it had to cease operations and lay off its staff of about 30 employees when Gov. Greg Abbott ordered the halt of water-recreation outfitters, said Texas Tubes' owner, Coley Reno.

"Our season is only so long, so if this thing goes to September, then we're done for the year," Mr. Reno said. He added that the tubing center's closure would hit the small Texas city's tourism economy because there would be fewer out-of-town guests to dine at nearby restaurants and sleep in Airbnbs.

Declines in unemployment last month were uneven across racial groups. The jobless rate for white workers fell 2.3 percentage points to 10.1% in June. The unemployment rate for Black workers decreased 1.4 percentage points to 15.4%. The rate for Latino workers fell below that of Black workers, declining 3.1 percentage points to 14.5%.

The economy entered a recession in February and appeared to begin a recovery as early as April. The speed at which businesses hire and consumers spend depends, in large part, on the course of the virus. Many Americans remain hesitant to shop in stores or eat at restaurants as coronavirus cases increase.

Stephanie Casebeer, 45 years old, has been temporarily out of work during the pandemic as a group fitness instructor at Miami-area gyms.

She said many of her students have indicated they aren't ready to return to in-person workouts, and gyms have continued to delay reopening yoga and cycling classes as coronavirus cases in Florida rise. She worried it would be tough financially for gyms to rely on virtual classes.

"It's made me nervous," she said. "How am I going to make my living doing what I enjoy for the next couple of years?"

Ms. Casebeer said unemployment benefits, which include an extra $600 a week from a federal stimulus bill, have helped her while she is without a job. She is still eager to return to teaching classes even though she makes more on unemployment benefits than she would as a group-fitness instructor.

"I like what I do enough to not necessarily care about keeping the extra $600," Ms. Casebeer said. "I want to go back to work, and I want to go back to work safely."

The June jobs report will likely inform congressional debate over the next federal coronavirus relief bill. Republicans and Democrats have been at odds over whether to extend the additional $600 a week in jobless benefits, scheduled to run out at the end of July.

Republicans have pointed to stronger-than-expected job growth as evidence workers no longer need expanded unemployment benefits. Democrats have argued that millions of people remain jobless and need extended aid to keep paying bills.

Some small businesses are already running through loans from the Paycheck Protection Program, which was designed to help companies keep workers on payrolls.

"Many owners received their loans in April and can no longer afford to keep workers past June," the National Federation of Independent Business said.

Jennifer Cumming owns Foundational Concepts, two physical therapy clinics in Overland Park, Kan., and Kansas City, Mo. She was able to use the federal small-business loans to rehire employees this spring after they were furloughed at the onset of the pandemic.

But when the federal funds -- which lasted eight weeks -- expired in mid-June, Ms. Cumming wasn't able to guarantee stable paychecks for three of the company's 10 employees, who quit as a result. Ms. Cumming said she didn't plan on immediately replacing all of them, given the recent climb in coronavirus cases in her area.

"We want to be smart and not overextend ourselves," she said.

Write to Sarah Chaney at sarah.chaney@wsj.com

 

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