Shomporko Desk:-U.S. employment growth eased back extensively in July in the midst of a resurgence in new COVID-19 infections, offering the clearest proof yet that the economy’s recuperation from the downturn brought about by the pandemic was wavering.
Non-farm payrolls increased by 1.763 million jobs a month ago after a record 4.791 million in June, the Labor Department said on Friday. Economists polled by Reuters had forecast 1.6 million jobs would be added in July.
The unemployment rate tumbled to 10.2 per cent, from 11.1 per cent in June, however it has been one-sided descending by individuals misclassifying themselves as being “employed but absent from work.” At least 31.3 million individuals were accepting unemployment checks in mid-July.
“The steam has gone out of the engine and the economy is beginning to slow,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The loss of momentum will continue and my concern is that the combination of the virus resurgence and lack of action by Congress could really push employment into negative territory.”
The labour market step-back is more bad news for President Donald Trump, who is lagging in opinion polls behind former vice-president Joe Biden, the presumptive Democratic Party nominee for the Nov. 3 election.
It also piles up pressure on the White House and Congress to speed up negotiations on a second aid package, which have been dragging over differences on major issues including the size of a government benefit for tens of millions of unemployed workers.
A $600 US weekly unemployment benefit supplement expired last Friday, while thousands of businesses have burned through loans offered by the government to help with wages.
The economy, which entered into recession in February, suffered its biggest blow since the Great Depression in the second quarter, with gross domestic product dropping at its steepest pace in at least 73 years.
Infections of the respiratory illness soared across the country last month, forcing authorities in some of the worst affected areas in the West and South to either shut down businesses again or pause reopenings, sending workers back home. Demand for goods and services has suffered.
The slowdown in hiring challenges the U.S. stock market’s expectation of a V-shaped recovery. The S&P 500 index is up nearly 50 per cent from its March trough. As COVID-19 cases spiral and Republicans and Democrats bicker over another stimulus package, economists see a W-shaped recovery.
Economists estimate the Paycheck Protection Program, which gave business loans that can be partially forgiven if used for employee pay, saved around 1.3 million jobs at its peak. The extra $600 US weekly unemployment checks made up 20 per cent of personal income and helped to boost consumer spending in May and June.
Photo credit: AFP via Getty Images
News source: Reuters