July Jobs Report is a slip and slide

One step forward, two steps back, seemed to be the theme for the July Jobs Report from the U.S. The Labor Department, with its gain of 1.8 million non-farm jobs, and a “modest” 10.2 percent unemployment rate, that exceeded expectations of 1.6 million and 10.5 percent unemployment, but all things being equal it also gives rise to a sense of lowered expectation.

Taking even a rough estimate of the report, it’s as if a surgeon said, “well, you can only crawl right now, but one day you will walk again!” and crawling to the precipice seems the best outlook for the U.S. economy as it lurches and rolls with the effects of the COVID-19 pandemic that has shattered and shuttered jobs, homes, and lives across the nation.

Some economists have decided to see sunny skies in those numbers stating that the American market is strong and resilient. This seems to us a weak bedside manner that lacks more than a dose of reality - but maybe based on faith alone..

Much of the bump in the report comes from rehires after the March shutdown, especially in leisure and hospitality, but as quickly as they came back, they can quickly leave, since the stimulus money has all but evaporated for many American families as they face a mountain of unpaid bills and possible eviction for being unable to pay the rent.

Combine that with a reluctance to physically distance by many Americans, which has resulted in higher numbers of infections, in thirteen major cities, and the die seems cast for another shutdown.

In that vein, July saw an increase of 592,000  jobs in leisure and hospitality and 502,000, plus 100,000 in amusement and gambling, but with many people wary of going to restaurants, and the reduced footprint mandated by local laws, this downward slide will probably in clearer focus for the August report, and we like the following comment from The New York TImes, as a better barometer of these times:

“The rate of churn in the labor market remains incredibly high,” concluded Morgan Stanley’s economics team. In plain English, that means millions of workers finding a job only to be fired soon afterward, or being let go permanently after assuming a layoff was temporary.”

Even through the prism of hope, faith, and some charity, it’s easy to see that the downward slope can happen at any time, and with the U.S. leading the world in infections and death, and an uneven repose to personal protection, i.e. mask wearing, a minor first line of defense, that many people are refusing, holding weddings, motorcycle runs and even a return to youth athletics, that danger abounds.

As we have said, many times over, in previous posts, the marquee rate is only a slice of the real values, and the U-6 rate is the more accurate, and that “has come down from 22.8 percent in April,” these are those who have given up looking for work, or those who are marooned in part-time work, preferring full-time, but not finding it.

Still, the U-6 is among a series of data points that underscore just how difficult the labor market remains for those out of work, and delighting us was this:  “I think the U-6 is a better indicator of the job market than the 10 percent unemployment rate,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “The traditional unemployment rate doesn’t capture what’s happening on the ground.”

"It's great to see progress, but the speed of progress has slowed down and we're still far from any sort of healthy labor market right now," Nick Bunker, an economist at Indeed, told Business Insider.

BI also added this bracing splash of cold water: “Employment remains down 12.9 million jobs from its pre-pandemic February level, the report said, meaning that only about 42% of the jobs lost during the crisis have been recovered. Bunker pointed out that the cumulative hit to unemployment and the new unemployment rate were still worse than during the Great Recession.”

Dan North, a senior economist at Euler Hermes North America, told Business Insider that all things considered with the bump, there "are some other considerations here,one is that "you have to ask how sustainable these gains are" — if there's another wave of COVID-19, many of the jobs re-added in industries such as leisure and hospitality and retail trade could be on the chopping block again.”

And, aye there's the rub.

The specterof 30 million people out of work has not given the Republican dominated Senate a desire to help those that face eviction, and loss of property, as they pushed back continuing the $600 unemployment extension, that was a lifeline to many whose lives were teetering on the brink of disaster.

Now enters President Trump with a series of executive orders to give a $400 extension, relief from student loan debt, and a payroll deduction holiday, that some fear will endanger the Social Security program.

Also worrisome is the fate of state and local governments whose cash-strapped coffers have offered few alternatives, and despite a lack of true data, due to extensions, this can affect employment for many, and as The Washington Post opined, “At the state and local levels, revenue is still way down and demand for services still way up. Many states and municipalities just started a new fiscal year, and without further federal help we should expect more layoffs ahead. Job losses at state and local governments have knock-on effects throughout the private sector, too, since these laid-off workers cut back on spending, government services decline, private contracts get canceled, etc.”

A wise woman once said that the past is past and cannot come back again, and that the future is all that we can call our own, then embracing the future along with a healthy dose of reality, is crucial to seeing the world’s largest economy, and its people thrive.