economy Markets

July Jobs Report Raises Questions, But Answers Aren’t Forthcoming

The July jobs report (which beat expectations, ostensibly suggesting reinstated virus containment measures across some large US states weren’t as damaging as some feared) raised more questions than it answered.

I’ll deftly sidestep concerns about the president’s “big number” tease days ahead of the release and focus strictly on the data itself.

One thing that sticks out immediately is that the gap between white and African American unemployment continued to widen in July, albeit by a slim margin. The rate for African Americans fell to 14.6% from 15.4% in June, while the rate for whites dropped below 10% for the first time since the onset of the pandemic.

That’s just further evidence to support the contention that the current crisis is exacerbating societal divides and perpetuating inequality.

Permanent job losses rose slightly last month, but it’s barely visible on the chart.

The rise in April, May, and June was extremely disconcerting and suggested structural damage was piling up.

The visual (below) shows permanent job losers as a percent of the pre-recession peak in employment. This comes courtesy of Calculated Risk, and underscores that the number of permanent job losers was largely unchanged from June.

The participation rate for prime-age workers fell to 81.3% from 81.5% last month. That’s not great news.

The following color from the BLS around education employment is also worth noting:

Typically, public-sector education employment declines in July (before seasonal adjustment). However, employment declines occurred earlier than usual this year due to the pandemic, resulting in unusually large July increases in local government education (+215,000) and state government education (+30,000) after seasonal adjustment.

I suppose what’s most surprising for me, is the apparent resilience of leisure and hospitality and especially food services.

All manner of anecdotal and quantitative evidence suggested that restaurants and bars were laboring (no pun intended) under the reinstated lockdowns. Yelp’s data, for example, showed that out of restaurants which have closed since March 1, 60% were permanently shuttered as of July 10. Moreover, total restaurant closures rose 2,179 from June 15 through early July, Yelp said.

Obviously, one can’t draw any definitive conclusions from a proprietary Yelp dataset, but the point is simply to note that restaurants are still suffering mightily. Many establishments that have re-opened are still operating under various types of constraints and businesses serving alcohol have been subjected to renewed lockdowns in some states.

Given that, the figure (below) is rather remarkable.

I suppose the market should just take these numbers with a sigh of relief as opposed to a grain of salt, given that to do otherwise would be to implicitly posit a conspiracy of some kind. And, obviously, you needn’t resort to paranoia to retain a skeptical bias. It could well be that the damage from the newly reinstated containment measures across the US doesn’t show up until the August report.

In a characteristically cautious take, ING cast doubt on the official unemployment figure. “When there isn’t any [work] if you’re a bar worker or a gym instructor, for example, there isn’t a great deal of point [in looking] – remember, you don’t need to be looking to claim unemployment benefits”.

I suppose the most important figure of all remains the simplest — namely that we are still almost 13 million jobs below pre-pandemic employment levels.


 

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