As a general rule, not many job numbers should be made for a month. The numbers bounce a lot – because they are survey-based, they are subject to sampling error, and are only preliminary. In the following months, they are sometimes significantly revised. However, the Labor Department’s employment report, correctly interpreted, remains the most comprehensive and timely reading on the state of the economy that we have had in the six and a half months of Joe Biden’s presidency. The July report, released Friday by the Labor Department, provided three takeaways.
First and foremost, as many parts of the country have removed coronavirus-related restrictions, and money has been funneled into a big pandemic relief bill, the economy is enjoying solid job growth. The main figure on Friday was that employers created nine hundred and forty-three thousand unused jobs in July, and the unemployment rate fell sharply – from 5.8 percent to 5.4 percent. More importantly, this upward trend in job growth continued. Over the former three months, according to the Labor Department’s revised figures, the average number of unused jobs being created has been eight hundred and thirty-seven thousand. This represents an increase of nearly sixty per cent compared to the previous three months.
This improvement reflects the reopening and revitalization of many businesses, particularly service outlets such as hotels and restaurants. Since May, the leisure and hospitality sector alone has created about 1.1 million jobs, and employment gains in this sector in July – three hundred and eighty thousand – accounted for about forty percent of overall job growth. Other sectors have added jobs as well, including transportation, manufacturing, healthcare, and financial services. Employment in retail declined slightly in July, but that decline came following two months of powerful gains. Also, don’t read too much into the reported significant gains in local government education: In this sector, school closures have wreaked havoc on the Labor Department’s seasonal adjustment procedures.
Another encouraging development is that many of the people who got jobs final month have been out of work for at fewest six months, classifying them as lengthy-term unemployed. Being unemployed for a lengthy time makes it more firm to find a job: nevertheless, the number of people in this category has decreased by five hundred and sixty thousand. It appears that many of those who have returned to work have been people who were laid off at the start of the pandemic but who have not completely lost touch with their employers. The number of people reporting temporary layoffs has fallen from eighteen million, in April of final year, to 1.2 million now. The wide job gains were reflected in the official unemployment rate. Since May, it has decreased in almost all age, educational and ethnic groups. (The exceptions are teens and adults without a lofty school diploma.) At 5.4 percent, it’s back to the level it was in April 2015.
This is the pleasing news. But the second key takeaway is that there is still a lengthy way to go for the economy to reach the level it had just prior the pandemic. Compared to February 2020, non-farm employment overall is still down by 5.7 million jobs. Allowing population growth, which is steadily expanding the workforce, the gap between actual employment and packed employment is much larger than this figure. Nick Bunker, an economist at Indeed Hiring Lab, estimates the gap between actual employment and the pre-pandemic trend at at fewest 8.6 million.
This shortage is also reflected in two significant numbers that do not get as much attention as the headline unemployment number. The first is the labor force participation rate, which is the proportion of the non-institutionalized adult population working or looking for work. In July, the turnout barely moved, which is disappointing. It is now 61.7 percent, which is 1.7 percentage points lower than the February 2020 figure. The second significant figure is the employment-to-population ratio, which is the broadest measure of labor market rigor. That percentage rose 0.4 percentage points final month, but that acquire put it 2.7 percentage points below its level at the start of the pandemic.
These numbers suggest that there are still plenty of people who have dropped out of the workforce but could be tempted to return by the booming job market and put an end to the pandemic. These include parents who cease their jobs to take concern of their children and older workers who retired beforetime. Also, there are still big gaps in employment rates between ethnic groups. Among whites, the unemployment rate is now just 4.8 percent. Among African Americans, 8.2 percent. Among Hispanics, it’s 6.2 percent, and among Asians, 5.2 percent. On the bright side, the unemployment rate among African Americans fell by a packed percentage point final month. But that decline was largely caused by the sudden drop in the African-American labor force participation rate rather than job growth. In fact, seasonally adjusted employment among African Americans fell by twelve thousand in July.
We’ll have to wait until next month to see if that’s a statistical indication, but the broader point is that there is a distinguished need and a distinguished potential for more job growth. Even if employment will preserve pace with the rapid rate seen over the former three months, Bunker calculates, it will take until this time next year for the economy to catch up with the pre-pandemic trend line in employment.
The big interrogate, of course, is how the delta variable will affect coming employment. The third and final conclusion from the jobs report is that we don’t know yet. The Labor Department implemented its own salary survey in the week of July 12, when the seven-day average of unused cases was still less than thirty thousand. Since then, that rate has tripled to nearly a hundred thousand, and the number of hospitalizations and deaths – sharply in many places. In response, a number of towns and cities implemented unused mask states. The Biden administration has introduced one for federal employees.
So far, there have been few reports of companies closing or laying off workers due to the delta variable. Also, real-time economic indicators, such as Google navigation data and the number of people going through TSA checkpoints at airports, showed no appreciable decrease. But that could change, depending on the course of the virus — a point the White House Council of Economic Advisers acknowledged in a calculated blog post regarding the unused jobs report. After noting the powerful numbers, the council stated that “the economic recovery will not be conclude until the public health situation is brought under control, as reinforced by the rise of Corona virus disease Cases associated with the delta formula.” So Amen.
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