What to watch on jobs day: A stalled recovery
After historically fast job growth in May and June, the jobs report for July is sure to disappoint. Because so many jobs were lost in March and April, the economy remains 14.7 million jobs short of where it was in February, and a full recovery even with rapid growth is many months away. As COVID-19 has spread rapidly throughout the country, various other data released since the reference period in mid-June suggest—at best—a stalled recovery. At worst, we could see job losses in July. Whichever is the case, it is clear that the bounceback in May and June is over and that the mammoth jobs gap will take years to claw back unless policy becomes much better on both the public health and economic fronts.
In this preview post, I’m going to take you on a brief foray into the data that predict a very disappointing economic performance for this week’s jobs report. First, let’s start with the weekly unemployment insurance data. As of mid-July, 34.3 million workers—or about 20% of the pre-pandemic workforce—were either on unemployment benefits or have applied and are waiting to see if they will get benefits. Although the continuation of record high levels of unemployment insurance may include some pent up demand from the difficulty of accessing the system, there has been no measurable improvement in these unemployment insurance numbers in weeks.
Second, let’s turn to the Census Bureau’s Household Pulse Survey. Data collection has occurred every week since April 23 and the survey asks questions about the impact of COVID-19 on people’s lives, notably with details on employment. One key question asked is whether the respondent was employed in the last seven days. According to my analysis of the published tables, employment dropped by 6.7 million from the survey week for the June jobs report to the survey week for the July jobs report. This suggests a reversal, not a slowdown, in the recovery. This should not be a shock. As many have noted since the beginning of the coronavirus shock, economic recovery depends entirely on success in managing the spread of the virus, and this management has failed spectacularly since early June. There is a strong correlation between faster growth in COVID-19 cases and faster declines in employment, as illustrated by economist Aaron Sojourner here. Further, analysis by economist Arin Dube strongly suggests that these trends are driven by a slowdown in states that experienced a resurgence in COVID-19 cases, namely in Arizona, California, Florida, Georgia, and Texas.
Third, employment changes reported by Homebase have also been quite useful to uncover details on the labor market because the data are available on a daily basis for hourly workers at thousands of small businesses. Maximiliano Dvorkin and Asha Bharadwaj at the Federal Reserve Bank of St. Louis analyze Homebase data to predict the monthly employment numbers. Using comparable data for June and July reference periods, they find that there has been a slowdown and slight reversion in employment since the week of June 12. As with the Household Pulse Survey, they find that the states which recovered the least in that period (Arizona, Florida, and Texas) also experienced a large number of COVID-19 cases.
Other data, such as from Open Table, suggest that economic activity flatlined between mid-June and mid-July, again suggesting at the very best a stalled recovery. Whether the jobs report comes in around zero or negative, it is clear that rising cases have measurably slowed the economic recovery. And, I fear, the recovery will remain stalled for quite some time if more financial support for workers, their families, and state and local governments is not forthcoming now and through the pandemic-driven recession.