June NFP report: Returning Workers Back is one Thing, it’s Another Thing to Keep Them

<p>So yesterday we saw another big surprise in the US macro data: June Payrolls jumped 4.8M (3.2M exp), unemployment fell to 11.1%. However, these two indicators do not reveal the whole picture. It should be borne in mind that 31.5 million people continue to receive benefits, and the number of employed is 15M lower than in February. In addition, as some states began to partially reinstate lockdowns, numbers in July may be worse.</p>
<p><img class="alignnone size-large wp-image-46456" src="http://blog.tickmill.com/wp-content/uploads/2020/07/1-2-1024×466.png" alt="" width="1024" height="466" srcset="https://blog.tickmill.com/wp-content/uploads/2020/07/1-2-1024×466.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/07/1-2-300×136.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/07/1-2-768×349.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/07/1-2.png 1456w" sizes="(max-width: 1024px) 100vw, 1024px" /></p>
<p>The report did not make a serious impression on the market, as the states continued to remove lockdowns in June and this process naturally leads to reopening of firms and return of workers back to work. Therefore, it’s more correct to talk about restarting old jobs. However, returning workers to their workplaces is one thing, it is another thing to keep them with a reduced sales volume. Time will tell.</p>
<p>Even after strong job growth in June, employment in the US economy is still lower than the February level by 14.66 million. Extended unemployment benefits cover the income gap, but this scheme will be valid only until July 31, and it is unlikely that these 14.66 million will return to work by August. As a result, some shock of consumption is a time bomb for the US economy.</p>
<p>Unemployment fell from 13.3% to 11.1% but given that more than 31 million people continue to receive benefits, the official figure may underestimate the true number of unemployed.</p>
<p>The hotel industry and leisure made the largest contribution to payrolls (+2.088Mjobs), retail grew by 740K, education and healthcare added 568K jobs.</p>
<p>“Sticky” initial and continuing unemployment claims in the last week of June is also worrying development. Initial claims again increased more than forecast (1.425M with a forecast of 1.35M), continuing claims remained at 19.2M with a forecast of 19M, slightly higher compared to the previous week:</p>
<p><img class="alignnone size-large wp-image-46457" src="http://blog.tickmill.com/wp-content/uploads/2020/07/2-1-1024×456.png" alt="" width="1024" height="456" srcset="https://blog.tickmill.com/wp-content/uploads/2020/07/2-1-1024×456.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/07/2-1-300×134.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/07/2-1-768×342.png 768w, https://blog.tickmill.com/wp-content/uploads/2020/07/2-1.png 1478w" sizes="(max-width: 1024px) 100vw, 1024px" /></p>
<p>Homebase data indicates gradual increase in layoffs in small businesses. Some of them could take advantage of PPP loans (which the government basically agreed to forgive) and now, after they spent the money, they decided to start firing staff. According to the National Federation of Independent Enterprises, 14% of respondents said they used the loan, but they would have to start firing workers because demand has not recovered to the level before the coronacrisis. The data once again points to the importance of the wage protection program offered by the government in containing a wave of layoffs. It is obvious that state support is effectively delaying the onset of true fallout from the lockdowns and it’s really hard to predict how far in this direction the government can go.</p>
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