July Jobs Data Will Provide Clues on Strength of the Recovery
By Eric Morath
The July jobs report, to be released Friday, could be among the
most politically consequential of the economic downturn caused by
the coronavirus pandemic.
The labor market has swung wildly since the virus nearly halted
the economy in mid-March. Consumer fear of infection and
government-mandated shutdowns of businesses caused the loss of more
than 20 million jobs in April, the largest decline in a single
month in Labor Department records back to the late 1930s. Allowing
employers to reopen and recall workers subsequently resulted in the
best back-to-back months of hiring in May and June, with employers
adding a combined 7.5 million jobs.
The July report will show whether the healing continued or
sputtered amid rising Covid-19 cases and deaths, as some
jurisdictions halted or rolled back reopening plans. The
information could influence policy makers' next steps, businesses'
hiring strategies, consumers' confidence and voters' moods.
If job creation in July continued anywhere near the May and June
pace, and the unemployment rate extends a steep descent, it would
send a bright message about the economy: The labor market is
recovering rapidly, the need for further federal financial
assistance is limited, and President Trump can tell an economic
comeback story as he seeks re-election in November.
If job growth slowed, stalled or reversed in July, the takeaway
would be darker, that a short and partial economic rebound is
faltering. This could bolster arguments for extended government
support and strengthen presumptive Democratic presidential nominee
Joe Biden's pitch for change in the White House.
"The labor market is clearly healing, but far from healthy,"
said Carl Tannenbaum, chief economist at Northern Trust. "We went
from a complete stop to 20 miles per hour, and that's resulted in a
nice restoration of jobs. Progress from here will be more
Economists surveyed by The Wall Street Journal expect Friday's
report to show the labor market is still improving, though at a
cooling pace. They project employers added 1.3 million jobs in
July, leaving the economy with about 13 million fewer jobs than in
February. They expect the report to show the unemployment rate fell
to 10.6% in July from June's 11.1% reading, which was down from a
recent high of 14.7% in April.
Several signs indicate the labor market is losing momentum.
After declining for months following a late March peak, new
applications for unemployment benefits, a proxy for layoffs, have
edged higher the past two weeks, according to the Labor Department.
New job postings in July were down from early June, according to
ZipRecruiter. Companies ranging from Harley-Davidson Inc. to hedge
fund Bridgewater Associates to Microsoft Corp.-owned LinkedIn
announced job cuts in July.
When Congress passed stimulus measures in March, they were
designed to confront a short-term disruption with jobless benefits
and loan programs set to expire in midsummer. The disruptions have
proved more persistent. While states have allowed many businesses
to reopen, a rising number of Covid-19 cases caused many states to
impose renewed restrictions and might have cooled some consumer
Federal policy makers are debating how much additional financial
assistance to provide. Congress is working on a new stimulus bill
but lawmakers remained at odds last week.
Federal Reserve officials, after cutting their benchmark
interest rate to near zero and increasing bond buying this spring,
didn't offer any new policy steps following a meeting last week,
but reiterated their pledge to maintain aggressive measures to
support the economy.
Like policy makers, economists are also split on the strength of
the recovery and will look to the July data for clues.
William Spriggs, chief economist at the AFL-CIO federation of
labor unions, is skeptical that the pace of recent job gains can be
sustained. He said much of the hiring this spring came from
restaurants and retailers who recalled workers once they were
allowed to resume operations. The country now needs to confront
persistently high unemployment and consumers skittish about
traveling, dining out and making longer-term investments.
"We're down at deeper depths than the Great Recession and don't
have a plan on how to confront the virus," he said, referring to
the recession of 2007-09.
Conversely, Sean Snaith, director of the University of Central
Florida's Institute for Economic Forecasting, is among the
economists who expect the labor market to continue to heal this
year. He projects the unemployment rate will fall below 8% by
year-end. His forecast is based on the assumption that governors
and mayors won't reimpose the strict restrictions because they saw
the economic consequences of those actions this spring.
"The snapback won't be instantaneous," he said. But "as the
economy reopens, pent up demand will be released and the labor
market will recover."
Write to Eric Morath at email@example.com
(END) Dow Jones Newswires
August 02, 2020 11:14 ET (15:14 GMT)
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