Slowing U.S. job growth, rising COVID-19 raise doubts on the recovery's strength

 A resurgence in COVID-19 cases didn’t shut off the American job creation machine last month — but it did slow it down.

Employers added 1.8 million jobs in July, slightly more than had been expected but far fewer than the gains of the previous two months. And while the unemployment rate dropped from 11.1% to 10.2%, it remains worrisomely high.

The coronavirus outbreaks and the resulting lockdowns and fear that kept Americans away from restaurants, bars, and shops hammered the economy in the spring. Employers slashed tens of millions of jobs as businesses shut their doors to slow the virus’ spread. The economy shrank at a harrowing annual rate of nearly 33% from April through June — by far the worst three months on record.

As businesses began to reopen, the job market came back, recording unprecedented gains in May and June. But a surge in confirmed viral cases as summer began heightened doubts about whether a meaningful recovery can be sustained, especially with Congress deadlocked over proposals to provide further aid to the unemployed and to struggling states and cities.

Here are five takeaways from July’s jobs report:

JOBS GREW, BUT MORE SLOWLY

Some economists feared that the resurgence in COVID cases would stop the jobs recovery in its tracks. It didn’t. July’s 1.8 million new jobs marked the third-best month of job creation on record. The problem is that hiring was down sharply from May’s 2.7 million added jobs and June’s 4.8 million.

All told, the United States has recovered just 42% of the jobs that were lost in March and April. And the weakening pace of hiring suggests a long slog of recovery ahead.

Rising viral cases in the South and West have forced many businesses to delay or reverse plans to reopen. In Texas, for instance, just 26% of bars were closed as of June 21. Two weeks later, the figure had shot up to 74%, though it has since declined slightly, according to the data firm Womply.

Moreover, a tentative economic comeback had been supported by a government relief program that included a crucial $600-a-week federal add-on to weekly state unemployment benefits. It allowed millions of unemployed people to afford necessities.

But the expanded jobless aid has now expired, and Congress has failed to extend it or provide another financial stimulus to Americans. The loss of that money means that tens of millions of jobless Americans can’t spend as much as they formerly did, which, in turn, means a drag on the economy.

“The loss of enhanced unemployment benefits and an inability to pass another stimulus bill will threaten a labor market recovery that already appears to be losing momentum,” Scott Anderson, chief economist at Bank of the West, wrote in a research report.

BLUE-COLLAR JOB GROWTH SLOWED SHARPLY

Hiring by private companies has increasingly narrowed to service businesses, like restaurants and retail shops, in contrast to factories, construction companies, mines, and other goods-producing companies. In May, goods producers had added 676,000 jobs (21% of new private-sector positions) and then 515,000 (11%) in June before adding far fewer — 39,000 (less than 3% of new positions) — in July.

Among factories, the lone exception last month was automakers, now enjoying an uptick in sales because of falling loan rates and some pent-up demand for cars. Auto companies accounted for all of July’s factory hires.

Recent job gains, Anderson noted, mainly reflect businesses that are recalling workers they had let go in the spring when the pandemic suddenly struck hard. By contrast, he wrote, “job growth downshifted sharply last month in manufacturing, construction, information and business services, signaling prolonged labor market weakness just below the surface.”

GOVERNMENT JOB GAINS WERE LIKELY EXAGGERATED

The Labor Department’s July figures show that the government at all levels added 301,000 jobs last month, up from 54,000 in June. That appeared to be a surprisingly strong performance.

But the government job gains were exaggerated by a technicality: Many local school districts had laid off teachers, bus drivers, and school cafeteria workers early this year because of the pandemic lockups — in the spring, instead of in the summer as usual. That change warped the Labor Department’s summertime seasonal adjustments and had the effect of inflating its count of government workers in July.

Economists are nervously monitoring government employment. Many have been urging Congress to deliver massive aid to state and local governments that are suffering a loss of tax revenue from the recession and are prevented by balanced-budget requirements from stimulating their economies with stepped-up spending.

But Congress has yet to agree on providing any further help to state or local governments.

BLACK AND HISPANIC WORKERS GAINED, BUT DISPARITIES PERSIST

Black and Hispanic workers gained jobs at a faster pace than whites in July, but their unemployment rates remain far higher.

The number of Black Americans who were employed grew by 234,000 or 1.4%. And the number of employed Hispanics grew by 174,000 or 0.7%. While employment grew by 688,000 or just 0.6%. African Americans and Hispanics are more likely to occupy the service sector jobs that have been called back to work.

Still, 14.6% of Black and 12.9% of Hispanic adults were unemployed in July, versus 9.2% of whites — the continuation of a longstanding racial disparity in joblessness.

MANY WERE RELUCTANT TO JUMP INTO THE JOB MARKET

The recent hiring gains haven’t managed to draw many more Americans off the sidelines to look for jobs. The labor force — which includes people who either have a job or are looking for one — dipped last month by 62,000, to 61.4% of the adult population from 61.5% in June.

“With coronavirus cases surging and the economic recovery faltering, discouraged and fearful workers were likely more reluctant to rejoin the official ranks of those seeking work,” said Lydia Boussour, senior economist at Oxford Economics.

U.S. hiring slowed in July as the coronavirus outbreak worsened, and the government’s jobs report offered signs Friday that the economic damage from the pandemic could last far longer than many observers originally envisioned.

The United States added 1.8 million jobs in July, a pullback from the previous two months. At any other time, hiring at that level would be seen as a blowout gain. But after employers shed a staggering 22 million jobs in March and April, much larger increases are needed to heal the job market. The hiring of the past three months has recovered 42% of the jobs lost to the pandemic-induced recession, according to the Labor Department’s report.

Though the unemployment rate fell last month from 11.1% to 10.2%, that level still exceeds the highest rate during the 2008-2009 Great Recession.

Roughly half the job gains were in the industries hit hardest by the virus: restaurants, retail shops, bars, hotels, and entertainment venues such as casinos. Those jobs have been relatively quick to return after the broadest shutdowns ended in May and June.

But economists worry that the next leg of job growth will be harder to achieve, particularly as the virus dampens confidence, leaving much of the country only partially reopened, most travel on hold, and millions of employees working from home. The number of people unemployed for longer than 15 weeks jumped in July to more than 6 million, a sign many of the unemployed will have to find work at new companies or even in new occupations, a potentially lengthy process.

Constance Hunter, the chief economist at accounting firm KPMG, noted that many jobs in hotels, sports stadiums, and the travel industry probably will not return until a vaccine is developed.

“When are you going to be comfortable again being in an air-conditioned room with 400 people?” she asked. “There are whole parts of the economy that will remain unemployed until we have much tighter control of this virus.”

The jobs report emerged as new infections run at about 55,000 a day. While that’s down from a peak of well over 70,000 in the second half of July, cases are rising in about half of the states, and deaths are climbing in many of them.

In other virus-related developments Friday:

— New York Gov. Andrew Cuomo announced that schools can bring children back to classrooms for the start of the school year, citing success in battling the virus in the state that once was the U.S. heart of the pandemic. The decision clears the way for schools to offer at least some days of in-person classes, alongside remote learning.

— California has surpassed 10,000 deaths from the coronavirus, making it the U.S. state with the third-highest number of deaths since the beginning of the pandemic. The figure was reported Friday by Johns Hopkins University.

— A small South Dakota town launched a huge 10-day motorcycle rally on Friday despite fears it could lead to a massive coronavirus outbreak. Organizers of the 80th Sturgis Motorcycle Rally said they were expecting 250,000 people from all over the country. South Dakota has no mask mandates, and many who arrived on Friday expressed defiance of measures meant to prevent the spread of the virus.

— Russia boasted that it’s about to become the first country to approve a COVID-19 vaccine, with mass vaccinations planned as early as October using shots that are yet to complete clinical trials. Scientists worldwide say the rush could backfire if the vaccine is neither effective nor safe.

Back in the spring, the widespread hope was that temporarily shutting down the economy would defeat the virus, after which businesses could quickly reopen and call back laid-off workers. But the resurgence of the virus in much of the country has reversed some reopenings and made it harder for many people to get back to work.

In addition to the rising number of longer-term unemployed, the proportion of Americans who are either working or looking for work slipped last month to 61.4%, down 2 percentage points from February. That suggests that many out of work see little prospect of finding a job.

And the number of Americans who say their job losses are permanent was flat last month despite the rise in hiring.

Cassy Menon, 36, was furloughed March 17 from her job arranging travel for university students, faculty and staff, and was originally told the layoff would last 90 days. She was initially able to keep her health insurance.

“After I stopped crying, I immediately updated my resume,” she said and began looking for work. An additional $600 in unemployment aid from the federal government helped her and her husband stay on top of bills, and her health insurance helped pay for the anti-depressants she began taking.

But in June, she was told that as of July 1 the job cut would become permanent. After applying for 300 jobs, she has had two interviews, both in mortgage banking. Both would pay much less than her previous job.

Friday’s report suggested that high unemployment and shriveled incomes for many households will remain an issue through the November elections and a potential threat to President Donald Trump’s reelection prospects.

Trump quickly celebrated the report with a pair of tweets, including one that read “Great Jobs Numbers!” But aides are nervous that the recovery is still fragile. The president remained out of sight Friday, beginning a three-day weekend at his Bedminster, New Jersey, golf club.

His Democratic opponent, Joe Biden, was quick to blame Trump for the potentially faltering recovery.

“It did not have to be this bad. We are in a deeper economic hole than we should be because of Donald Trump’s historic failure to respond to the pandemic,” Biden said.

Many economists are urging Congress to extend various forms of economic aid to sustain a recovery. A supplemental $600 weekly federal unemployment payment expired last week. House Democrats want to extend it, while Senate Republicans want to reduce it to $200. An eviction moratorium for federally subsidized housing has also ended. Both sides have agreed to another $1,200 stimulus payment but are deadlocked on whether to provide more aid to state and local governments.

The talks between the two sides collapsed on Friday, and Trump said Friday night that he was likely to issue more, limited executive orders related to COVID-19, perhaps in the next day or so, if he can’t reach a broad agreement with Congress.

“A lot of households will run out of money in the next few weeks,” said Eric Winograd, an economist at AllianceBernstein, an investment firm. “If the government does not make up that income, those households will not be able to consume in a way that supports the recovery.”

Some companies that are hiring complain that the generous unemployment benefits have made it harder to attract candidates. But several economic studies suggest the benefits have not been a disincentive.

Mike Parra, CEO for the Americas at DHL Express, said his company is seeking to fill 1,700 jobs. But the resurgent virus has slowed applications in California, Texas, and Florida, where outbreaks have been particularly large.

In the meantime, some employers are adapting to the pandemic by doing business with fewer workers.

Peter Klamka, the owner of the Blind Pig restaurant in Las Vegas, is now concentrating on pickup and delivery orders. His restaurant’s revenue plummeted along with tourism. He is operating with just five employees, down from 25 before the pandemic.

“There certainly isn’t sufficient business to bring anyone back,” Klamka said.