Economic Indicators | Coronavirus

News from EPI Two months of gains, but a huge jobs deficit remains, and deepening pain is on the horizon: Congress needs to act

Today’s jobs report from the Bureau of Labor Statistics shows two months in a row of payroll employment gains, an increase in jobs of 4.8 million in June on top of 2.7 million in May. But, because so many jobs were lost in March and April, we are still 14.7 million jobs below where we were in February, before the pandemic spread. Additionally, today’s unemployment insurance claims data showed that last week, 2.3 million workers applied for unemployment benefits (1.4 million applied for regular state unemployment insurance, and 0.8 million applied for Pandemic Unemployment Assistance). This is the 15th week in a row that unemployment claims have been more than twice the worst week of the Great Recession.

In June, jobs were added due to many states continuing to lift their stay at home requirements. Job gains occurred primarily in leisure and hospitality, an increase of 2.1 million, a significant share of the overall rise of 4.8 million. Other sectors that saw significant job gains include retail trade, education and health services, other services, manufacturing, and professional and business services. Public-sector employment saw a mild uptick, though that was due to seasonal adjustments, which anticipate a drop off in employment at the end of the school year and mean month-to-month changes are providing distorted information in this sector right now. Since February, state and local government jobs are down 1.5 million. (This is described in more detail below.)

The unemployment rate fell as well, from 13.3% in May to 11.1% in June. At 11.1%, the unemployment rate remains higher than in the worst month of the Great Recession, when it hit 10.0% in 2009. As with May, the employment gains were uneven. The white unemployment rate continued to fall, from a high of 14.2% in April to 12.4% in May and now 10.1% in June. At the same time, the Black unemployment rate went from 16.7% in April to 16.8% in May and saw mild improvement in June, hitting 15.4%.. Among Black men, however, the unemployment rate actually rose between May and June, hitting this recession’s high water mark of 16.3% in June. The Latinx unemployment rate saw some improvements the last couple of months. At 15.3%, Latina workers saw significant improvement—likely with the sharp rise in leisure and hospitality in June—and now have a slightly lower unemployment rate than Black male workers (16.3%).

Even with these mild improvements, a large jobs deficit remains. Payroll employment remains 14.7 million lower than it was in February, and the unemployment rate is 7.6 percentage points higher than it was in February. And, the unemployment rate is undercounting the extent of economic pain. In June, there were 17.8 million workers who were officially unemployed, but there were an additional 2.0 million workers who were temporarily unemployed but who were being misclassified as “employed not at work,” (see questions 11-14 here for more explanation). And 5.0 million who were out of work as a result of the virus were being counted as having dropped out of the labor force. Altogether, that is 24.5 million workers who are either officially unemployed or otherwise out of work as a result of the virus. If all these workers were taken into account, the unemployment rate would be a whopping 15.0%. Further, only about a third of these workers can reasonably expect to be called back to a prior job; the unemployment rate that includes only those who don’t have a reasonable chance of being called back to a prior job was 9.3%. (The methodology for the numbers in this paragraph can be found here).

How do June’s jobs numbers square with June’s unemployment insurance (UI) claims? As mentioned above, the June jobs data show that as of mid-June, there were 24.5 million workers who were either officially unemployed or otherwise out of work as a result of the virus. The unemployment insurance claims data out today show that as of June 13, there were 31.5 million workers claiming unemployment benefits in all programs. Comparing those two figures suggests that more than 100% of people out of work as a result of the virus are claiming unemployment benefits. However, this direct comparison is problematic. For example, some part-time workers are receiving unemployment benefits, but they aren’t counted in the 24.5 million because that figure only includes people who aren’t working. It is also likely that there is some double-counting of benefits claims. But nevertheless, it clear that a large share of people who are out of work as a result of the virus are on unemployment insurance, and that is good news.

Unfortunately, deepening pain is on the horizon. As bad as the labor market is, it’s likely that June is a temporary respite from the storm. Given the increase in coronavirus over the last couple of weeks along with re-shuttering of businesses as well as the pending expiration (on July 25th) of the $600 enhanced weekly unemployment insurance benefits, June’s labor market—as weak as it is—is the best we can expect for a while. With the hit to incomes from the loss of the $600 per week UI benefit and the increasing spread of the coronavirus, economic activity will soften because people don’t have the money to spend and they are afraid to go out.

The reference period for the jobs survey was mid-June, just before COVID-19 cases began to spike. We are already hearing reports of people being laid off for the second time. As mentioned above, unemployment Insurance data since the mid-June reference week continue to show historically high initial claims—2.3 million for the week ending June 27 (including both regular state UI and Pandemic Unemployment Assistance). These are initial claims, less and less likely to be residual claims from pent up demand from the initial weeks of overloaded state unemployment insurance offices.

Further, without massive additional federal aid, austerity is certainly on the horizon for state and local governments, because state and local tax revenues are plummeting. This means losses in public sector services, including cuts to school budgets at a time when schools are already struggling with the increased need for creative options for students. Losses in public-sector employment will affect Black workers more, particularly Black women workers. The slight rise in public sector employment in June was an artificial correction given large drops in employment at periods when employment is typically stable as opposed to end of the year drops which would be captured by the seasonal adjustment. Employment in state and local government is still 1.5 million (or 7.5%) lower than February. The local public sector losses have been concentrated in public K-12 education, which was still below its pre-Great Recession levels before the pandemic hit and is now 0.7 million jobs (or 8.3%) below where it was in February.

Congress needs to act. The personal income data not only show how important unemployment insurance has been in buffering households and the economy, it also shows just how bad things will get when the enhanced unemployment insurance benefits of $600 per week expires. This economic pain is avoidable. Further, Congress needs to protect workers who have to go to work with adequate compensation and a safe work environment. And, Congress needs to provide substantial aid to state and local governments, which is essential to providing necessary services and is key to the recovery.

The data all point to more trouble to come. We are not unambiguously on an upward trajectory. Policymakers would do well to provide safeguards so that workers and their families can heed the advice of health experts without sacrificing their economic well-being.

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