Unemployment Rate Down to 11.1 Percent

The June jobs report was even better than expected, with the US economy adding 4.8 million jobs over the month, according to a survey of employers. This was the biggest increase in jobs in the history of the series, going back to 1939, surpassing May’s increase of 2.699 million (revised higher from 2.509 million). Private-sector employment rose by 4.78 million, while government employment rose by 33,000. 

Employment has bounced back as states have allowed more economic activity, but is still far below its all-time high in February. After the short but very intense Viral Recession in the spring, a recovery is now underway. There were combined job losses of 22.2 million in March and April, but now the US economy has recovered one-third of those. Still, employment is down by 14.7 million, or 9.6 percent, from its peak in February. 

The unemployment rate fell to 11.1 percent in June, down from 12.3 percent in May and 14.7 percent in April. While this is a very rapid improvement, the rate is far higher than the 3.5 percent in January and February, before the coronavirus crisis. According to the Bureau of Labor Statistics the unemployment rate is likely understated because of measurement issues, but there is no question that the rate has fallen dramatically over the past two months, heralding a major improvement in the labor market. 

Employment as measured in the household survey (different from the employer survey) rose by 4.9 million, while the labor force increased by 1.7 million. The share of adults (16 and over) with a job rose to 54.6 percent in June, up from 52.8 percent in May and 51.3 percent in April, but still down dramatically from 60.7 percent in February. 

Goods-producing industries added 500,000 jobs over the month, with increases of 160,000 in construction and 360,000 in manufacturing. Private services-providing industries added 4.3 million jobs over the month. Leisure and hospitality services led the way as restaurants started to reopen, adding more than 2 million jobs in June. But employment in the industry is still down by almost 5 million from February. All of the major service industries added jobs in June, with gains of better than 500,000 in retail trade and education and health services. 

Average hourly earnings fell 1.2 percent in June as job gains were in lower-paying industries, especially leisure/hospitality services. There was a huge 4.7 percent increase in the average wage in April as low-wage workers were much more likely to lose their jobs than high-wage workers. On a year-over-year basis average hourly earnings were up 5.0 percent in June from one year ago; the distribution of job losses (and now job gains) across industries has skewed the earnings data. 

Very strong job growth in May and then even larger gains in June are further indication that the Viral Recession is now over and a recovery started in May as states allowed more economic activity. The economy has already added back one-third of the jobs lost during the recession, and the unemployment rate has fallen by more than 3 percentage points over the past two months. Still, the level of economic activity is much lower than it was in February, and the labor market still has a long way to go before it recovers. The job market will continue to improve over the course of 2020 and into 2021, although the pace of job gains will slow. Risks are to the downside, however. In particular, the recent increase in the number of coronavirus cases and new state restrictions on activity are a significant threat to the recovery.

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