The Unemployment Rate Is Falling, But More People Are Losing Their Jobs Permanently

The Unemployment Rate Is Falling, But More People Are Losing Their Jobs Permanently

These days, reading the monthly jobs report can feel like opening a time capsule. According to the data for June, which was released today, the recovery from the COVID-19 recession was still chugging along as of the middle of last month, when the two surveys that form the backbone of the report were conducted. The unemployment rate fell from 13.3 percent in May to 11.1 percent in June, and 4.8 million more people were employed in June than in May.

Those numbers look promising — but it’s important to remember that they’re just a snapshot of what the economy looked like in mid-June. And a lot has changed since then. Most importantly, COVID-19 infections have spiked in states across the country, and many governors have rolled back the phased reopenings that brought many jobless workers back into the labor force. That could have a seismic impact on the sectors of the economy, like leisure and hospitality, that saw the biggest gains in June.

Even underneath the surface of the June report, there were signs that the recession is deepening. Crucially, the number of workers who have permanently lost their jobs rose quite a bit — signaling that for an increasing number of Americans, getting back to work won’t be an easy matter. And the unemployment rate for white Americans continues to be much lower than the unemployment rate for Black, Hispanic or Asian Americans. That’s an important reminder that some workers are continuing to do much better than others as the recovery creaks into gear.

If you just focus on the report’s headline numbers — the unemployment rate and number of payroll jobs — the country’s economic situation was looking up in June. In fact, the drop in the unemployment rate may have been even more dramatic than the topline number lets on. Over the past few months, the Bureau of Labor Statistics has been struggling with an issue that’s unique to our pandemic-ridden times: A substantial number of workers were reporting that they were absent from their jobs for the entire week referenced in the survey for “other reasons.” That probably meant they were temporarily out of work because of COVID-19 — but they weren’t counted as unemployed.

To be clear: The BLS has been extremely transparent about the presence of this problem, and it does not mean that the numbers were fudged. Our methods for measuring unemployment are simply not designed for a pandemic-induced recession. But it is important to take the misclassification issue into account because if those workers had been included in April, BLS estimates that the unemployment rate would have been about 20 percent; in May, the rate would have been about 16 percent. By June, the BLS reported that it mostly had the misclassification issue under control — which meant the actual unemployment rate declined even more substantially, to around 12 percent.

Bear in mind, though, that we still have a long way to go before we’re anywhere near pre-pandemic levels of unemployment. It’s all about your frame of reference: An 11.1 percent unemployment rate is stunningly low compared with where we were in April, when close to 20 percent of the population was unemployed. But it’s still higher than at any point in modern history — including the unemployment rate at the apex of the Great Recession.

And there are many reasons to believe that the recovery could stall — or even backslide — in the coming months. One clue is tucked in the June report: Of those who did lose jobs, a larger share of them were permanent than in previous months.

In April and May, 88.6 percent of job losses were classified by the BLS as “temporary,” which fit the early theme of this recession: Businesses shut down temporarily to stop the spread of COVID-19 but planned to reopen later as the virus came under control — particularly with the assistance of government loans such as the Paycheck Protection Program, which incentivized small businesses to keep employees on payroll during the closures. But in June, the share of job losses that were temporary fell to 78.6 percent, a sign that a growing number of workers will not have a job waiting for them when the crisis lifts.

“As more job losses become permanent, this recession will look more and more like an ordinary recession, where in recent history the recovery has been a slow slog,” said Nick Bunker, the director of economic research for North America at the Indeed Hiring Lab, a research institute connected to the job-search site Indeed. “That means the hopes of a quick recovery will be slimmer and slimmer.”

The fact that some of the industries hit hardest early in the recession made big gains in June is both good and bad news. Leisure and hospitality, which had lost a staggering 8.3 million jobs in March and April, built on its May gains to add 2.1 million more workers in June, an increase of nearly 21 percent month over month. Similarly, retail trade, which lost 2.4 million jobs in March and April, bounced back with about 740,000 new workers in June, a 5.4 percent increase month over month. And education and health services, another of the industries most affected (with 2.8 million total job losses in March and April), added 568,000 jobs in June, for a 2.6 percent gain month over month.

Overall, almost every major industry sector of the economy added jobs in June, with total private employment up by 4.3 percent since May. However, it is worth noting that despite better-than-expected jobs reports in both May and now June, total private employment is still down 10.2 percent relative to its pre-crisis level in February. Things are looking better, but there is still a lot of room for improvement.

And the hammer might fall yet again on sectors like leisure and hospitality, which includes the restaurant industry. Several states allowed restaurants and even bars and casinos to reopen at partial capacity in May and June — only to abruptly close them again when case counts started to spike. That means that some of the workers who finally got to return to their jobs as servers, bartenders or blackjack dealers might well be unemployed again in the July report.

That everything these days is in a state of flux complicates even the most seasoned experts’ ability to read the report. Erica Groshen, who served as BLS commissioner from 2013 to 2017, said it’s extremely difficult to isolate the impact of the many different forces that are churning underneath the report. “We’ve got all of these effects that are going at cross-purposes,” she said. “We have the ongoing effects of restrictions in place. We have the effects of some restrictions being lifted. And we have the deepening of the recession itself.” All of that, she said, makes it hard to assess exactly what’s happening under the surface — much less what will happen next.

And again, the gains have not been equally distributed throughout the population — another theme of this very unequal recession. Although the unemployment rate for women dropped at a faster rate (2.8 percentage points) than for men (1.6) in June, women still had a higher overall unemployment rate than men did. Likewise, the unemployment rate for white Americans dropped by 2.3 percentage points last month, while it only fell by 1.4 percent for Black Americans and 1.2 percentage points for Asian Americans. And at 15.4 percent, Black Americans still have the highest unemployment rate of any racial or ethnic group, 5.3 percentage points higher than their white counterparts.

Perhaps one bit of encouraging data in this jobs report was that the unemployment rate for Latino or Hispanic Americans did drop by quite a bit — it was down 3.1 percentage points in June. However, that still left their overall unemployment rate at 14.5 percent, which is not only far higher than it was before the coronavirus recession began (it was 4.4 percent in February) but also higher than the unemployment rates for white (10.1 percent) or Asian (13.8 percent) Americans.

As we’ve said often during this crisis, you really need the next jobs report in order to interpret the current one. The June report shows that the unexpected employment gains of May were not a mirage — the economy really did start recovering earlier and more quickly than many economists expected. But next month’s report could be a sobering reminder of just how fragile any economic gains are — at least while the virus is still spiraling out of control in many parts of the country. So we’ll know better by next month whether the concerning trends in this report have deepened, as well as how much the recent COVID-19 outbreaks across the country have hamstrung the nascent recovery. In typical fashion, our economic data is moving at a much slower pace than the virus, which leaves us guessing at where things might head next.

CORRECTION (July 2, 2020, 4:45 p.m.): An earlier version of the permanent layoffs chart in this article incorrectly labeled the numbers of layoffs as being in the thousands when they should have been in the millions.

Powered by WPeMatico

Comments are closed.
%d bloggers like this: