• Nonfarm payrolls rose by 4.8 million in June, beating the median consensus forecast for 3 million.
  • The unemployment rate also improved further in June, falling to 11.1%, from to 13.3% in May, as the number of unemployed persons fell by 3.2 million to 17.8 million.
  • Job gains were widespread across industries, with particularly large gains in leisure and hospitality (+2.1 million), retail trade (+740k), education and health services (+568k), and manufacturing (356k).
  • People on temporary layoff fell 4.8 million in June to 10.6 million, as people were called back to work; however, the number of people on permanent layoff rose by 588k, to 2.9 million. The share of workers on permanent layoff has been creeping higher, hitting 16.2% (up from 10.9% in May).

Key Implications

  • The labor market recovery continued in early June (survey period ran through June 12th). The improvement in the unemployment rate is a welcome sign, especially as it came alongside a reported improvement in the potential number of workers “misclassified” as “employed but absent from work”. The Bureau of Labor Statistics reported that accounting for this potential misclassification, the unemployment rate could be as much as one percentage point higher (around 12%), but this is down considerably from the “misclassification adjusted” rate of 16.4% in May.
  • We are watching with particular interest the recovery in leisure and hospitality jobs, which accounted for 38% of the total jobs lost in March and April. The sector has now recovered 42% of the jobs lost and accounts for 47% of all of U.S. job gains in May and June. High-frequency data released since the employment survey show a slowing in momentum in this sector and the recent rise in COVID-19 cases in several states since then is likely to take further wind from the industry’s sales. This is likely to set back the improvement and lead to a slower rate of economic recovery going forward.
  • Another key question mark for the recovery is the level of fiscal support for businesses and workers. At the last minute, Congress extended the deadline for applications for the Payroll Protection Program to August 7th (from June 30th), but the $600 per week top up of unemployment insurance is slated to expire at the end of July. With the health crisis showing little signs of abating, we expect Congress to come up with another stimulus package. This will be an important element to sustaining the economic recovery through the second half of this year.

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