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Employment growth in the US is expected to slow significantly in July as COVID-19 cases soar

WASHINGTON (Reuters) – US employment growth has likely slowed significantly in July as COVID-19 infections have increased again. This would be the clearest evidence so far that the economic recovery has stalled from the pandemic recession.

FILE PHOTO: Hundreds of people line up outside the Kentucky Career Center in Frankfort, Kentucky, United States more than two hours before it opens for help with their jobless claims. REUTERS / Bryan Woolston

Friday’s closely watched employment report from the Department of Labor could put pressure on the White House and Congress to speed up negotiations on another aid package. The talks dragged out differences on key issues, including the amount of government benefit to tens of millions of unemployed workers.

A weekly unemployment benefit surcharge of $ 600 expired last Friday while thousands of businesses ran out of government loans in support of wages.

A relapse into the job market would be worse news for President Donald Trump, who lags behind former Vice President Joe Biden, the alleged Democratic Party candidate for the November 3 election, in opinion polls.

“The steam has left the engine and the economy is starting to slow down,” said Sung Won Son, professor of finance and economics at Loyola Marymount University in Los Angeles. “The loss of momentum will continue and I am concerned that the combination of the virus resurgence and the lack of action by Congress could really push employment into negative territory.”

According to a Reuters poll of economists, the non-agricultural workforce is likely to have increased by 1.58 million jobs in July, a sharp drop from the record high of 4.8 million in June. This would put wages and salaries 13.1 million below their pre-pandemic level. Employment peaked at 152.5 million in February.

The economy, which went into recession in February, suffered the biggest blow since the Great Depression in the second quarter. Gross domestic product fell at the steepest pace in at least 73 years.

However, there is a risk of a complete drop in payrolls in July. This week’s reports showed a sharp slowdown in hiring of private employers in July and a continuing decline in employment in manufacturing and services.

Homebase, a payroll planning and tracking company, has seen a slowdown and a slight reversal in employment since mid-June. The Census Bureau’s household survey found that at least 6 million jobs were lost between mid-June and the week through July 18 when the government surveyed employers and households about last month’s employment report.

The implicit job losses were in areas hit hardest by spikes in coronavirus infections. Cases of COVID-19, the respiratory disease caused by the virus, increased across the country last month and forced authorities in some of the worst affected areas in the west and south to either close shops or stop reopening and workers to send home. The demand for goods and services has suffered.


“This shouldn’t be a shock,” said Elise Gould, senior economist at the Economic Policy Institute in Washington. “The economic recovery depends on success in fighting the spread of the virus, and this management has spectacularly failed since early June.”

The expected decline in hiring would jeopardize the US stock market’s expectation of a V-shaped recovery. The S&P 500 Index .SPX is up nearly 50% from its March low. As COVID-19 cases keep rising and Republicans and Democrats arguing over another stimulus package, economists see a W-shaped recovery.

Economists appreciate the paycheck protection program, which has given businesses loans that can be partially granted when used to pay employees. At its peak, around 1.3 million jobs were saved. The additional $ 600 weekly unemployment controls represented 20% of personal income and helped boost consumer spending in May and June.

“The second phase of the recovery is going to be much more difficult,” said James Knightley, international chief economist at ING in New York. “We should be prepared for weaker employment and expenditure figures if there is no new broad and substantial fiscal package.”

Average hourly wages are expected to fall 0.5% in July after falling 1.2% in June, with most employment gains tending towards the low-wage industries. The working week drops from 34.5 hours in June to an average of 34.4 hours.

The unemployment rate is likely to have fallen from 11.1% in June to 10.5%. However, the measurement of the unemployment rate was skewed downwards by those who classified themselves as “employed but unemployed”. In mid-July, at least 31.3 million people received unemployment checks.

Economists believe that state and local government pay slips will account for more than half of employment growth in July. However, this should not be taken as a sign of strength.

The government’s model of seasonal fluctuations from the data usually assumes that education workers will cut their payslips in July. However, this happened earlier due to the pandemic that the model threw off.

“Many of the educational layoffs that typically occur in July probably came earlier this year, so the July reading on government payrolls could be artificially strong,” said JimO’Sullivan, chief US macro strategist at TD Securities in New York.

Reporting by Lucia Mutikani; Adaptation by Paul Simao

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