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4.8M jobs added and unemployment falls to 11.1% as more states reopen after COVID-19 shutdowns

The U.S. economy added a record 4.8 million jobs in June as states continued to allow businesses shuttered by the coronavirus to reopen and more Americans went back to work, even as massive layoffs have persisted.

The unemployment rate fell to 11.1% from 13.3% in May, the Labor Department said Thursday.

Economists surveyed by Bloomberg had estimated that 3.1 million jobs were added in June.

But while the rebound in employment has soundly topped estimates, a surge of new infections in many states threatens to curtail gains in coming months.

The number of Americans on temporary layoff fell by 4.8 million to 10.6 million as many laid-off workers were called back amid state reopenings. About 60% of unemployed workers were on temporary layoff, down from 73% in May. At the same time, 2.9 million people had permanently lost jobs in June, up from 2.3 million the prior month, in a sign more employers are cutting ties with workers.

ANNUNCIO PUBBLICITARIO

The Labor Department separately reported Thursday that 1.4 million Americans filed initial jobless claims last week, down from 1.5 million the prior week, a sign that a historically high number of workers continue to be laid off. Claims have reached a staggering 48 million the past three months.

“While the labor market recovery has surpassed expectations, it has only recouped three out of every 10 jobs lost,” economist Gregory Daco of Oxford Economics wrote in a note to clients.

The nation is trying to climb out of the steepest, but shortest, recession in its history – a deep freeze abruptly engineered by the government to contain the spread of the virus. In February, unemployment was at a 50-year low of 3.5%. The recovery is being shaped by a whirlwind of conflicting forces, making its path highly uncertain.

After shedding an unprecedented 22 million jobs in March and April, restaurants, retailers and other employers unexpectedly added 2.7 million positions in May as many states lifted restrictions sooner than health officials recommended. That allowed the rebound in payrolls to begin a month earlier than anticipated and sparked hope that the upswing could prove stronger than forecast.

Further stoking that belief: The vast majority of idled workers surveyed by Labor said they were on temporary layoff.

In June, leisure and hospitality, the sector hardest hit by the pandemic, gained 1.2 million jobs after adding 1.4 million the prior month, as payrolls surged by 1.5 million at restaurants and bars. Retail added 740,000 jobs; health care, 358,000; manufacturing, 356,000; professional and business services, 306,000; and construction, 158,000.

In Arlington, Virginia, the restaurant Palette 22 was forced to lay off its 50 employees in March and rehired most several weeks ago when the county began allowing outdoor dining, says manager Scott Bogue.

The 88-seat outdoor area is near capacity most nights, though sales dipped recently amid news reports of a spike in coronavirus cases in the South, Bogue says. Although the dining room recently reopened at partial capacity, he says, it’s drawing few patrons because of lingering fears of contagion.

Overall, Bogue says, revenue is about half its pre-pandemic level, but the restaurant-- which serves an international menu in an earthy, art gallery atmosphere -- is profitable.

Rene Sanchez, 30, a bartender and server, landed a job as a janitor during his furlough from Palette 22 but it paid about a quarter of his restaurant wages and tips. As a result, Sanchez, who lives with family members, stopped sending part of his earnings to his mother in El Salvador each month.

Now, Sanchez says he has resumed the practice. Although he’s still earning just half his former restaurant salary, he expects to return to his normal pay eventually.

“I’m so excited to be back,” he says.

While the economy has added 7.5 million jobs the past two months, that still leaves it nearly 15 million short of its pre-pandemic level. The strong bounce-back may have been largely fueled by the government’s Payroll Protection Program, Barclays wrote in a note to clients. That initiative provided small businesses loans that cover eight weeks of wages and other expenses and are forgivable as long as they retain workers or rehire those they cut. Job growth, however, could slow as firms deplete the funds and lay off some employees.

Also, even while restaurants, shops, theaters and other businesses are rehiring workers, job cuts have spread to other industries such as professional services, administration and education. And although many furloughed workers are being recalled by their employers, some businesses have closed for good amid plunging sales while others are hanging on but permanently laying off some staffers.

The picture is further muddied by a recent resurgence in infections in the South and West, leading 17 states to pause or roll back their reopening plans. That’s likely to spark more layoffs and less hiring in those regions, economists say.

“We’ve seen a significant slowdown (in job postings) the second half of (June),” says Becky Frankiewicz, president of ManpowerGroup North America, a leading staffing firm. That, she says, will likely crimp job gains in July.

Total postings fell 9% in the latter part of June, she says, but new ones rose 8%, indicating that states in the Northeast and Midwest are moving ahead with reopening plans and hiring more aggressively even as southern and western states throttle back.

"We expect the recovery from here will be a lot bumpier and job gains far slower on average," says economist Michael Pearce of Capital Economics.

Ian Shepherdson of Pantheon Macroeconomics said, "We can't rule out a decline in payrolls" in July and August.

Tom Gimbel, CEO of LaSalle Network, a Chicago area staffing firm, says hiring across most sectors picked up after plummeting in April but now has leveled off. Many top executives, he says, don’t believe they’ll get a good read on the economy and their prospects until enhanced unemployment benefits and other government aid that has propped up consumer spending runs dry in coming months.

“We’re playing with make-believe money,” he says. “It’s the unknown that we're dealing with.”

That, he says, could curb business confidence and hiring beyond the outlets that are bringing back at least some of their laid-off employees.

Moody’s Analytics reckons about half the jobs lost in the crisis will be recovered by year’s end, with unemployment remaining elevated near 10%. The research firm doesn’t expect total U.S. employment to return to pre-pandemic levels until 2023.

Other highlights in the report:

Misclassification of workers eases

The unemployment rate continued to be skewed by some survey respondents who reported they were employed but absent from work but should have said they were on temporary layoff. If those workers had been classified properly, the unemployment rate would have been about a percentage point higher, at 12.1%, Labor said. But that’s a marked improvement from May when the misclassification lowered unemployment by three percentage points.

Labor force participation rises

In June, the share of Americans working or looking for jobs -- which together make up the labor force – rose from 60.8% to 61.5%. That’s a positive because it means unemployment fell even as more people on the sidelines began looking for work. But, aside from the current crisis, the rate is still the lowest since the mid-1970s and underscores that more people have lost jobs than the unemployment rate suggests.

Many didn’t look for work because of fears of catching the virus while job hunting, caring for sick relatives or watching kids who were home now that schools are closed. Also, with much of the economy still shuttered, fewer were jobs available and many workers expected to be recalled by their employers as the pandemic eased.

Broader jobless measure drops

While the unemployment rate fell, a broader measure of joblessness also edged down. That gauge – which includes Americans working part-time even though they want full-time jobs, discouraged workers who have stopped looking and the unemployed – declined from 21.2% to 18%.

This article originally appeared on USA TODAY: Jobs report 2020: 4.8M positions added in June, unemployment dips to 11.1%