US employment growth slowed considerably in July, though much less badly as feared, amid a resurgence in new Covid-19 infections, offering the clearest evidence yet that the economy’s recovery from the recession due to the coronavirus pandemic was faltering.
Nonfarm payrolls increased by 1.763 million jobs last month after an archive 4.791 million in June, the Labor Department said on Friday (Aug 8). Economists polled by Reuters had forecast 1.6 million jobs were added in July.
The unemployment rate fell to 10.2 % from 11.1 per cent in June, but it has been biased downward by people misclassifying themselves as being “employed but absent from work.” At least 31.3 million persons were acquiring unemployment checks in mid-July.
“The steam has truly gone out from the engine and the economy is starting to slow,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in LA. “The increased 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's lagging in judgment polls behind former Vice President Joe Biden, the presumptive Democratic Party nominee for the Nov 3 election.
In addition, it piles up strain on the White House and Congress to speed up negotiations on another aid package, which were dragging over dissimilarities on major issues like the size of a government benefit for tens of millions of unemployed workers.
A US$600 (S$822) weekly unemployment benefit supplement expired last Friday, while thousands of businesses have burned through loans made available from the government to greatly help with wages.
The economy, which entered into recession in February, suffered its biggest blow since the Great Depression in the next quarter, with gross domestic product dropping at its steepest pace in at least 73 years.
Virus infections soared across the country last month, forcing authorities in a few of the worst damaged areas in the West and South to either turn off businesses again or pause reopenings, sending workers back home. Demand for goods and services has suffered.
The slowdown in hiring challenges the US stock market’s expectation of a V-shaped recovery. The S&P 500 index is up practically 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 that gave businesses loans which can be partially forgiven if used for employee pay saved around 1.3 million jobs at its peak. The extra US$600 weekly unemployment checks made up 20 per cent of personal income and helped to improve consumer spending in-may and June.