Businesses Hit Hard by Coronavirus Claw Back Jobs -- Update

07/02/2020 | 12:07pm

By Eric Morath and Danny Dougherty

WASHINGTON -- The two industries that suffered the most job loss because of the coronavirus pandemic and related shutdowns -- hospitality and retail -- saw the strongest gains the past two months as the U.S. economic engine restarted.

Still, those industries -- and employers more broadly -- are far from replacing all the jobs lost since February. And bars, restaurants, hotels and stores are particularly vulnerable to renewed layoffs because a recent spike in coronavirus cases in several states is causing governors to halt or roll back reopening plans.

Employment in leisure and hospitality increased by 2.1 million in June, the Labor Department said Thursday, accounting for about 40% of the overall gain in payrolls last month. Restaurants and bars were the driver, gaining about 1.5 million jobs for the second straight month. Despite the increases, total employment in food services and bars is down by 3.1 million since February.

Retailers added 740,000 jobs last month after hiring a net 372,000 in May. That shows reopening of main streets and malls is offsetting job cuts announced by some national chains. Still, the combined increase the past two months is less than half the 2.4 million jobs the sector lost in March and April.

The overall employment gain of 4.8 million in June, the most in records back to 1939, was reflected in sizable increases in most major industry categories, including health care, manufacturing and personal services, such as barber shops and nail salons

"Normally we should be celebrating a gain of 4.8 million jobs, but there are dark clouds ahead of us dashing hope of a V-shaped recovery," said Sung Won Sohn, an economist at Loyola Marymount University.

The surveys for the June report capture the labor market in the middle of the month. More recent data shows restaurant seating in several large cities declined at the end of June and credit-card spending eased, he said. Mr. Sohn said that suggested consumers, the driving force behind the U.S. economy, started to grow cautious as cases increased.

Total employment in June was down 14.7 million, or 9.6%, from February's pre-pandemic level.

Employers will add jobs in July, but at a slower pace, said Roiana Reid, an economist at Berenberg Capital Markets.

The June report reflects the first half of the month "when state reopenings were progressing quite smoothly across the country," while missing recent closures, she wrote in a note to clients. "We expect a smaller but still strong increase in nonfarm payrolls in July as other states that have flattened the curve continue to progress to new phases of their reopenings"

Unemployment fell across racial and gender groups in June, though the decline was uneven. 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 Hispanic workers fell below that of Black workers, declining 3.1 percentage points to 14.5%

The jobless rate for men declined to 10.6% from 12.2% in May. The rate for women was 11.7% in June versus 14.5% the prior month. The still elevated rate for women is consistent with women holding more jobs in the hard-hit restaurant and retail sectors.

The Labor Department said the overall unemployment rate of 11.1% is still an undercount because some workers were misclassified as employed, but absent from work, when they should have been counted as unemployed, on temporary layoff.

Had the error, which has occurred since March, not happened, June's unemployment rate would have been about 1 percentage point higher than reported.

"The degree of misclassification declined considerably in June," Bureau of Labor Statistics Commissioner William Beach said. He added the government is continuing to investigate the error and take steps to address the issue.

Thursday's report showed the share of unemployed workers on temporary layoff, meaning they expect to return to the same job within six months, remained historically high at 60% in June, but was down from an April peak of 78%.

That reflects that some layoffs that appeared temporary early in the spring have become permanent separations. However, it also shows that the number of Americans entering or re-entering the labor market is rising again.

Write to Eric Morath at eric.morath@wsj.com

 

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