(CBS New York) — In normal times, the economy adding 1.8 million jobs and dropping the unemployment rate by almost a full percentage point would be great news. But these are not normal times, these are pandemic times.
The sizable jobs growth in July, as reported by the Bureau of Labor Statistics, actually shows a slowing economy. Even with job gains over the last three months — 2.7 million more in May, 4.8 million in June — the economy is still 12.9 million jobs below its February total. The unemployment rate for July remains in double-digit territory at 10.2 percent, which is very high by historic standards. (The rate peaked in April at 14.7 percent.)
For Elise Gould, senior economist at the Economic Policy Institute, a non-profit, non-partisan think tank in Washington, DC, the unemployment figures are a little disappointing. “I know these are historically high numbers, but I would say that job gains have slowed considerably from what we had seen in May and June,” says Gould. “And we are still nearly 13 million jobs in the hole from where we were in February.”
In February, which seems like a million years ago, coronavirus had yet to affect the economy to any noticeable degree. By July, coronavirus had spread across the country, limiting most local economies and many sectors of the national economy.
Still, many businesses were attempting to reopen. The leisure and hospitality sector added almost 600,000 jobs last month. Food services and drinking places contributed just over 500,000 more. And retail chipped in another 250,000-plus.
It should be noted that the monthly employment numbers, drawn from the BLS’s Establishment Survey and Household Survey, look backward. The latest Establishment Survey counts workers who were paid for the pay period that includes July 12. The latest Household Survey uses July 12-18 as its reference week.
The weeks since mid-July have shown many parts of the economy recoiling as the virus flares up in large parts of the country. Nearly 1.2 million Americans filed new unemployment claims last week. Another 655,000 self-employed people applied for Pandemic Unemployment Assistance for the first time. In total, 31 million people are currently collecting unemployment benefits of one form or another.
The economy sits in a precarious spot, and coronavirus stands in the way of any sort of real recovery. Case counts and virus-related deaths remain high. The U.S. has over 4.7 million confirmed cases to date, with California, Florida and Texas the top states. Deaths increased 24 percent last week and exceeded 1,000 for most days in July.
“The slowdown (in job gains) is likely due to the increasing spread of the coronavirus,” says Gould. “And we’ll learn that more, in terms of which states are seeing these employment losses, when the state numbers come out. But I think we will probably see a fair amount of divergence in what’s happening in different parts of the country in terms of jobs.”
With the disease largely unchecked and job growth slowing, consumer confidence fell in July as well. “Large declines were experienced in Michigan, Florida, Texas and California, no doubt a result of the resurgence of COVID-19,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board, a research group that publishes various economic indicators. “Looking ahead, consumers have grown less optimistic about the short-term outlook for the economy and labor market and remain subdued about their financial prospects. Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending.”
Consumer spending is likely to take another hit with the end of the most recent stimulus. The loss of the additional $600 weekly unemployment benefit will cut many people’s income by half or more. According to Gould, “it’s going to be devastating for workers and their families losing that essential lifeline. Their ability to put food on the table, pay their rent, pay their mortgages compromised greatly. It’s going to mean they’re not spending money in the economy.”
The loss of that spending will slow job growth and slow the recovery, it likely already is. “If we lose that entire $600 permanently, that’s a loss of potential employment of five million jobs,” Gould speculates. “It’s a huge impact, both for individuals and for the economy as a whole.”
Long-term unemployment is another concern. Those who are unemployed at least 27 weeks have a harder time securing work, find that their skills deteriorate and face future earnings losses. Their household finances suffer too, with savings decreasing, debt increasing and the rent or mortgage more likely to go unpaid.
The extra $600 per week has propped up many workers and their households. But that money, at least for now, is gone. And it isn’t long before individual suffering seeps into institutions, becoming an even bigger problem for the economy. With meaningful recovery blocked by a deadly virus that threatens every trip beyond one’s front door, how long until short-term damage becomes long-term damage?
Early pandemic job losses began to show up in mid-March, almost five months ago. Many of those people are still unemployed today, with the six-month mark approaching.