June Jobs Report: Recovery Surges Forward, But for How Much Longer?

July 2, 2020

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s economists:

The U.S. labor market roared back to life in June, with employers adding 4.8 million jobs to payrolls pushing the nation’s unemployment rate down to 11.1 percent — a welcome dose of positive news as large parts of the economy reopened in June and millions of American workers and consumers ventured out of their homes after months of sheltering in place. 

However, today’s report is an already-outdated look in the rearview mirror. Rough waters are surely ahead for the economy in coming months. With surging COVID-19 cases hitting new highs in California, Texas and Florida  in the past week, this report arrives against the ominous backdrop of a second wave that could shutter millions of American small businesses and put a freeze on hiring. 

Job gains in June surged back to life in leisure and hospitality (+2.1 million jobs) and retail trade (+740,000 jobs) as small businesses reopened around the country in June. Hiring in June was robust in nearly every sector of the economy, with strong job gains in manufacturing, health care and construction as well. That’s consistent with real-time hiring trends from Glassdoor’s Job Market Report, which shows strong hiring in June in travel & tourism, consumer services, arts and entertainment and other sectors hit hard by the first wave of COVID-19 that began reopening last month in many states.

One powerful revelation from today’s jobs report is how swiftly U.S. job growth can bounce back once officials give employers the green light on reopening. June’s figures are a litmus test for how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months.

With millions of Americans still out of work, the economy has a long recovery ahead. The economy officially dipped into the first recession in more than a decade in February, according to the National Bureau of Economic Research (NBER). However, many layoffs today remain temporary. Nearly 5 million temporarily laid-off workers were recalled to jobs in June alone. If all of the remaining 10.5 million temporarily furloughed workers were immediately rehired, the nation’s unemployment rate would have shrunk to 4.5 in June.

Next month, the July jobs report could feel like Groundhog’s Day, if states reinstate shelter-in-place and business closures that’d result in higher unemployment and jobs losses. Policymakers are struggling to keep the embers of the economy’s fire alive as the economy enters the fifth month of the Great Lockdown recession next month. Any losses would likely be smaller than April’s freefall as states apply lessons and take a smarter, more targeted approach to the pandemic.

UI Claims Diverge as Initial Claims Fall while Continuing Claims Rise

The weekly unemployment insurance (UI) claims report from the Department of Labor was also released this morning. Initial claims fell to 1.4 million for the week ending June 27, extending a now 13-week-long trend of declining claims. Continuing claims rose slightly to 19.3 million, a concerning signal that the recovery may not have enough economic momentum to bulldoze through any obstacles. The more timely UI claims data signals the recovery is continuing sluggishly even as COVID-19 cases climb across the country, but the second wave of cases raises the specter of a second wave of economic disruption.

To speak with Dr. Andrew Chamberlain or Daniel Zhao about today’s jobs report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @adchamberlain or @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.

More Insights

The unemployment rate dropped to 11.1%, better than expected but still over 10%, the Great Recession peak. The BLS also made substantial progress in fixing the misclassification error with the upper bound on the error improving significantly from roughly +3pp to +1pp, indicating that it’s not likely to be big factor in coming reports.

While the big improvement is encouraging , it’s important to remember we’re still in a deep economic hole. Non-farm payrolls increased 4.8 million, returning us only to 2014 levels with 14.7 million jobs still missing relative to Feb 2020.

Encouragingly, many of those layoffs are temporary and much of the increase in jobs is from rehiring of furloughed workers. However, permanent layoffs are ticking up as well.

Most industries improved in May. Hard-hit industries like leisure & hospitality and retail have bounced back faster. On the other hand, the recovery appears sluggish in the government and information industries where gains have been muted.

Continuing claims rose slightly last week. The weekly data is volatile and the overall trend is still downward, but the slow recovery is a sign that there is still a long way to go before we return to economic normal.

Initial UI claims extended their 13-week streak of declines though the rate of decline has slowed dramatically in the last few weeks. Claims are falling even as COVID-19 cases rise, but it may take another few weeks for the economic impact of those rising cases to show up.