Employers brought back millions more workers in June as businesses began to reopen across the country. But the recent surge in coronavirus cases is threatening to stall the economic recovery long before it has reached most of the people who lost their jobs.
U.S. payrolls grew by 4.8 million in June, the Labor Department said Thursday. It was the second month of strong gains after April’s huge losses, when businesses laid off or furloughed tens of millions of workers as the pandemic put a large swath of economic activity on ice. The gains were broad-based, cutting across industries and demographic groups.
But the thaw is far from complete. There were still nearly 15 million fewer jobs in June than in February, before the pandemic forced businesses to close. The unemployment rate fell to 11.1% in June, down from a peak of 14.7% in April but still higher than in any previous period since World War II. The rate would have been about 1 percentage point higher, the Labor Department said, had it not been for persistent data-collection problems.
The monthly jobs data was collected in mid-June, before coronavirus cases began to spike in Arizona, Florida and several other states. More timely data, also released by the Labor Department on Thursday, showed that 1.4 million Americans filed new claims for state unemployment benefits the week before last— the 15th straight week that the figure exceeded 1 million — and another 840,000 filed for benefits under the federal Pandemic Unemployment Assistance program.
Weekly claims increased in Texas, Arizona and several other states, although they fell in other states that have had a resurgence of the virus. Economists fear that layoffs could accelerate now that states have begun ordering some businesses to close again.
Economists warn there is another threat looming: the expiration of government assistance, in particular the enhanced unemployment benefits providing an extra $600 per week to laid-off workers. Without congressional action, those benefits will cease at the end of this month, potentially eliminating a key source of support not just for the workers but for the broader economy as well.
“We’re in a very deep hole, and we just set ourselves back again,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “It’s difficult to climb out of that hole.”
The H.Wood Group, which operates a dozen bars, restaurants and nightclubs in the Los Angeles area, had just begun to dig out of that hole when the latest round of shutdown orders hit. The company spent weeks figuring out how to operate safely, installing plexiglass dividers between banquettes, eliminating reusable menus and adopting policies like temperature checks at the door and mandatory masks.
In June, that work appeared ready to pay off: Two of the company’s restaurants reopened, and three bars were set to reopen last week. Customers, eager to eat out after weeks of lockdown, snapped up reservations.
“The first two nights were a little weird,” as people adjusted to masks, face shields and temperature checks, said John Terzian, the company’s co-owner. “But after Night 3, I think people settled in, and honestly it felt perfect.”
Then last Sunday, Gov. Gavin Newsom ordered Los Angeles bars to shut down; Wednesday, he ordered restaurants to suspend dine-in service as well. Terzian, who had brought back roughly half his 400-person workforce and was on track to bring back the rest, instead had to start telling people they were out of work again. He said he worried that many would leave the industry altogether.
Terzian said many smaller restaurant businesses might not be able to afford to reopen a second time. And while H.Wood is financially stable, he said, he will be slower to reopen next time, lest authorities pull the rug out from under him.
“I think we would be really hesitant,” he said. “Staying shut we understood, but reopening and reshutting is just wrong.”
Economists say stories like Terzian’s drive home a central fact of the crisis: The economy cannot truly begin to recover until the pandemic is under control. Reopening quickly may bring back some jobs, but that rebound will not last if increased activity brings more virus cases.
“The virus drives the economics,” said Betsey Stevenson, a member of the Council of Economic Advisers under President Barack Obama who is now at the University of Michigan. If cases continue to rise, as health officials warn, “we’re not going to have people going back to work,” she added.
“In fact, we’re going to see more people staying home,” she said.
The problem is that the longer the public health crisis drags on, the more permanent damage is done to the economy. Total employment has grown the past two months because companies have begun recalling temporarily laid-off workers. But layoffs have continued as the economic effects of the pandemic ripple through the economy, reaching businesses and industries that were spared earlier.
If businesses cannot reopen, or can return only at a fraction of their previous sales, many temporary job losses are likely to become permanent. The number of people reporting they had permanently lost their jobs rose in June even as the number of workers on temporary layoff fell sharply for the second consecutive month.
“We’re going on four months now,” said Olugbenga Ajilore, a senior economist at the Center for American Progress, a progressive group. “There’s only so long that these businesses can hold out before it just doesn’t become feasible.”
The rebound in jobs has not been shared equally across groups. The unemployment rate for white workers has fallen more than 4 percentage points over the past two months, to 10.1%. For Black workers, the jobless rate has fallen just over 1 point, to 15.4%, and the unemployment rate for Black men actually rose in June. Asian workers, too, have seen only small gains. Latinos, hit particularly hard when the pandemic shut down much of the service sector, have had a larger drop in unemployment but their jobless rate remains elevated at 14.5%.
The good news is that the strong job gains in May and June suggest that the permanent economic damage so far has been relatively limited, in part because of the trillions of dollars of emergency spending authorized by Congress. Most of those out of work still say they expect to return to their old jobs eventually, and companies are bringing back furloughed workers at a faster rate than many economists predicted a few months ago. June’s gains were concentrated in industries like restaurants and retail that were battered in the first phase of the pandemic, but construction, manufacturing and professional services brought back workers as well.
With so much uncertainty, many employers are remaining cautious. Nearly 150,000 of the positions created in June were temporary jobs.
“We’re seeing hesitancy on the part of employers to make permanent job offers,” said Amy Glaser, a senior vice president at the staffing firm Adecco.