And now for the bad news.
Obviously, the narrative on Thursday will be that the US labor market is not just on the mend, but in fact rapidly recovering from the depression-like oblivion of March and April.
If the numbers are to be trusted (and I’m not going to traffic in conspiracy theories — readers don’t come here for that), there’s reason to celebrate. Donald Trump held a press conference to “discuss” the report, and he did his best to perpetuate the idea that America is witnessing the “greatest comeback in history”.
But it’s important not to lose track of the bigger picture in the summer haze.
First (and most obviously) the labor market is nowhere near “healed”.
In aggregate, the US economy has a Herculean task ahead of it to reclaim pre-pandemic levels of employment.
Further, it’s worth noting that while the impact of the much maligned misclassification error appears to be waning, the unemployment rate (which officially fell to 11.1% in June) would have been more than 1 percentage point higher.
Here’s the official word from the BLS:
The degree of misclassification declined considerably in June. BLS and Census Bureau staff have been reviewing survey responses that might have been misclassified. The misclassification hinges on a question about the main reason people were absent from their jobs. If people who were absent due to temporary, pandemic-related closures were recorded as absent due to “other reasons,” they could have been misclassified. When interviewers record a response of “other reason,” they also add a few words describing that other reason. The review of these brief descriptions found that the share of responses that may have been misclassified was much smaller in June than in prior months.
BLS and the Census Bureau are continuing to investigate the misclassification and are taking additional steps to address the issue. If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical June) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 1 percentage point higher than reported (on a not seasonally adjusted basis). However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.
But perhaps more notable than any of that, permanent job losses are piling up.
All along, questions about the structural damage done by the pandemic and associated containment measures have haunted analysts and economists.
With that in mind, note that the June jobs report appears to show the biggest monthly jump in permanent job losses of the crisis at 588,000.
The blue line suggests the structural damage from COVID-19 is, in fact, some semblance of profound.
On a rolling, three-month basis, permanent job losses rival levels seen during the financial crisis.
In the same vein (and as discussed at more length in “Latest Jobless Claims Numbers Suggest We’re Not Out Of The Woods“), continuing claims aren’t coming down anymore.
When considered in conjunction with the fact that initial claims have essentially stopped falling, the figure below is disconcerting.
Some of the early, quick takes on the data are scathing indeed.
“If you dig into the jobless claims report you find that the total number of people claiming unemployment benefits in all programs rose 916.7 thousand in the week of 13 June (coincidentally the week of the June jobs report data collection), taking the total number of claimants to 31.49 million”, ING’s James Knightley writes, noting that “this is nearly double the 17.75 million ‘officially’ unemployed based in the jobs report”.
The read-through, from the bank’s perspective, is that the 11.1% official unemployment figure “grossly understates the true picture”.
Beyond that, ING says “the bigger issue is that the spike in COVID-19 cases means several states are announcing renewed containment measures with others delaying their phased re-opening”.
Leisure and hospitality businesses (which added millions of jobs in June according to the BLS), “may take the view that it simply isn’t viable for them to stay open, which will only add to the problems in the jobs market”, Knightley warns.
The point of the above isn’t necessarily to throw cold water on the recovery narrative. Rather, it’s just to provide a balanced take that perhaps more accurately (and compassionately) tallies the extent of the human suffering still unfolding in the world’s largest economy.