US June Payrolls Rise: Unemployment Rate 11.1%

The US June employment report showed further, though measured, improvement, reflecting continued state re-openings. The sharp payrolls decline the Labor Department reported Thursday leaves a big hole to climb out of, and that recovery is likely to be hindered by the rebound in Covid-19 cases across several states. In many of those areas, businesses were forced back into more restrictions after initially re-opening.

Nonfarm payrolls rose by 4.80 million in June, well above the 3.00 million gain expected. There was an upward revision to May payrolls to a 2.70 million gain, but a downward revision to April payrolls to a 20.79 million decline. Private payrolls rose by 4.77 million after a modest increase of 33,000 in government payrolls is excluded. Analysts had expected private payrolls to rise by 2.66 million.

The largest improvement was again in the hard-hit leisure and hospitality sector, which includes hotels and restaurants. That sector added 2.08 million jobs in June after a 1.40 million gain in May. The food services sector alone added 1.48 million jobs in June.

Retail trade jobs rose by 740,000 on further state re-openings, but a partial reversal is likely in July if the current resurgence of COVID-19 is not contained. Health care jobs added 358,000 jobs. The services sector as a whole added 4.26 million jobs in June after a 2.54 million increase in May. Manufacturing jobs rose by 356,000 and construction jobs rose by 158,000. The goods sector added a total of 504,000 jobs.

Average hourly earnings fell by 1.2% after a 1.0% decline in May, but the year/year rate was still an elevated 5.0% due to the sharp April gain. The return of lower-wage earners to the calculation lowered the average further after the initial run-up in April, but it will take some time for the average to fall to pre-Covid levels.

In the household survey, the unemployment rate fell to 11.1% from 13.3% in May, below expectations for a decrease to 12.4%.

The BLS again said if workers that were temporarily furloughed due to Covid-19 were labelled as unemployed on temporary layoff rather than as simply absent from work, the unadjusted unemployment rate would have been closer to 12% rather than the 11.2% unadjusted rate reported. The size of the adjustment was 3 percentage points in May and 5 percentage points in April, so it appears that survey methods have improved.

The labour force participation rate rose to 61.1% from 60.8% in May but was still below the 62.7% rate in March prior to the full Covid impact. In June, the number of employed rose, while the number of unemployed declined. The wider U-6 rate, which represents those underemployed and those working part-time rather than full-time, fell to 18.0% from 21.2% in May.

In other data releases on Thursday, initial jobless claims fell by only 55,000 to 1.427 million in the June 27 week, still ahead of the 1.400 million level expected and following an upward revision to 1.482 million in the previous week. While initial claims continued their declining trend, the pace has slowed to the point that it is almost meaningless. And with the Covid resurgence in some states reversing the loosening of restrictions, the level of claims is unlikely to move lower at any great speed.

Unadjusted claims fell by 14,575 in the current week, with no clear picture emerging from the state data.

The Labor Department reported that 839,563 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis, down from 881,242 in the previous week. The level of continuing claims rose by 59,000 to 19.290 million in the June 20 week after three weekly declines.

The international trade gap widened to $54.6 billion in May from $49.8 billion in April. Both imports and exports declined in the month, even as US demand was recovering. The country data showed that the bilateral gaps with China, Canada, and Mexico widened, but due to increased trade barriers, the gaps with European countries narrowed and the one with the United Kingdom moved into surplus.

Colin Lambert

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