July jobs were still growing. But also slowing

With COVID-19 resurging in July and unemployment claims still running at more than 1.4 million a week, there was worry that Friday’s US jobs report might show that the gains of jobs that came in the previous 2 months was near an end. And Wednesday’s ADP payrolls report of only 167,000 job gains for July added to those concerns.

Turns out we didn’t have to worry so much, at least not yet, as July’s numbers continued the recovery out of the large hole that was dug in March and April.

Total nonfarm payroll employment rose by 1.8 million in July, and the unemployment rate fell to 10.2 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In July, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services, and health care.

Oh, so we’re all good, and things are well on their way back to normal?

Let’s not go that far. The obvious reason why we shouldn’t break out the party hats is that unemployment is still above 10% - higher than at any time during the Great Recession. And while 9.3 million jobs have come back in the last 3 months, there are still 12.9 million that have not.

There are also some odd quirks inside the numbers that make the 1.76 million gain a little less impressive. For example, manufacturing had a gain of 26,000 jobs, but if you take out the (strangely booming) auto sector, there was actually a loss of manufacturing jobs.

Manufacturing employment, July 2020
TOTAL JOB CHANGE +26,000
Autos and parts +39,300
Other durable manufacturing -24,300
Non-durable manufacturing +11,000
Net non-auto manufacturing -13,300

There were also a number of sectors that had big gains for July, but still is far down compared to where they were 6 months ago. This graphic from a Five Thirty Eight article on the jobs report gives a good indication of the work left to be done.

And going inside those sectors for July, it’s even weirder. Nearly 85% of the Leisure and Hospitality gains were in food services (+502,000), nearly 85% of the gains in professional services were in temporary help (+143,700), and nearly half of the retail gains were in clothing stores (+120,800). Those three areas account for almost 3/5 of all private sector job gains right there.

Even with the gains, employment in food services was still far below its February levels, and lodging and entertainment-related industries were barely helped at all in July, as those industries either were not allowing people to attend, or people were unwilling to travel.

That doesn't look like any "V" to me.

There’s also one other “bounce-back” in the jobs numbers that is solely due to the premature end of the school year in the COVID world.

This year, schools and colleges furloughed or laid off hundreds of thousands of workers in April and May because of the pandemic. So when BLS did its normal seasonal adjustment for July, it appeared as if state and local government jobs suddenly surged. Not so. 3/6

— Michael Leachman (@leachma2) August 7, 2020

This is where our friend “seasonal adjustment” comes into play, where fewer people were working jobs in these 4 education-related areas, but the jobs report calls them gains, because the massive amount of layoffs that usually happen after June had already happened.

Job change, July 2020
Public education, private education services, and child day care services
Seasonally adjusted jobs +313,500
Non-seasonally adjusted jobs -1,033,800

We’ll see how many of those education and day care jobs come back in August and September, given how up-in-the-air things are when it comes to whether students will be physically in schools and if people will be forced back into work places in the near future. If there aren't nearly as many jobs added back as normal, then we will see big "losses" in these sectors over the next 2 jobs reports.

Overall, it's still a pretty good report, and I suppose we should like progress on the jobs front when we can get it. But if GOPs in DC use this jobs report and the recent Bubbly growth in the stock market as reasons to take their foot off the gas and avoid using stimulus to aid the millions of people that are still out of work, then they are reading the wrong message from this report.

You can see that there is still a significant employment gap in July, with growth slowing notably in July, and more than a million people a week still becoming unemployed. The future doesn't look great either, given the large increase in job cuts that were announced in July, and COVID infections continuing to discourage people from getting out to spend money at many places. So if GOPs decide not to add much for stimulus, and the already-slowing economy gets a lot of its fuel taken out of it, then they will deserve the heavy losses that’ll come at the ballot box when the party in power sees a historic recession get deeper and longer due to its inaction.