Labor Market Continues to Heal

By Richard Branch, Chief Economist Dodge Data & Analytics

The U.S. economy added back 4.8 million jobs in June, well above expectations of 3.0 million. June’s addition follows a gain of 2.7 million in May (revised up from 2.5 million). Private sector employment improved by 4.8 million while the government sector added just 33,000 new positions. The unemployment rate fell to 11.1% from 13.3% in May. Questions raised about the April and May jobs reports (that furloughed workers were not classified as unemployed thereby lowering the unemployment rate) appear to have been somewhat mitigated in June.

 

Employment in the construction sector improved by 158,000 positions. Jobs in building construction increased by 32,000, while specialty contractors added 135,400 positions. Heavy and civil employment fell by 9,700 positions.  With June’s data the construction sector has added back more than half of the jobs lost in March and April.

While certainly a positive sign that the U.S. economy is in recovery, the survey was undertaken before new flare-ups of the virus in Texas, Florida, California and other states. It therefore does not reflect the new business shutdowns mandated by state and local governments in these areas. Should the number of new cases continue to accelerate in the weeks to come, and business closures expand, it raises questions about the ability of the labor market to post further strong gains and raises the specter of a stalled recovery.

In a separate report released this morning the number of initial claims for unemployment insurance for the week ending June 27 fell slightly to 1.43 million – still, its 14th week above 1 million. These elevated numbers continue to point to the downside risk for consumer spending, particularly when the expanded unemployment insurance benefits provided by the CARES Act expire at the end of the month.

 

 

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