The U.S. economy added 1.763 million jobs in July, bringing the unemployment rate down to 10.2 percent and reflecting the continued resumption of economic activity after COVID-19 shutdowns.
The Department of Labor said in its closely-watched “nonfarm payrolls” report released Friday that the vast majority of the job gains occurred in the services sector, which accounted for 1.72 million, while manufacturing added just 26,000 jobs. Economists polled by data provider FactSet had predicted the economy would add 1.6 million jobs.
While a better-than-expected number, July’s job gains fell far short of June’s 4.8 million increase and May’s 2.7 million gain, and indicates that only around 40 percent of the jobs lost due to pandemic-driven shutdowns have come back. It also reflects a slowing dynamic in the labor market recovery last month amid rising cases of COVID-19 infections in parts of the country.
“The steam has gone out of the engine and the economy is beginning to slow,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The loss of momentum will continue and my concern is that the combination of the virus resurgence and lack of action by Congress could really push employment into negative territory.”
The Labor Department report showed that the sectors that saw the largest gains were leisure and hospitality, followed by retail trade, government, professional and business services, and education and health care.
Employment change by industry, according to a Bureau of Labor Statistics report released on Aug. 7, 2020. (BLS)
Other labor market data released this week showed the number of Americans seeking jobless benefits fell last week to 1.2 million from around 1.4 million a week earlier. While bucking an earlier growth trend in jobless claims, the number of new weekly unemployment claims has come in at over 1 million for the 20th straight week, suggesting the labor market recovery is losing steam.
A report on Thursday from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S. employers surged 54 percent to 262,649 in July compared to the previous month. Hiring announcements totaled 246,507 last month, almost matching the layoffs.
“The downturn is far from over, especially as COVID cases rise around the country,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Consumers are buying fewer goods and services, businesses are closing, and bankruptcies are rising.”
Many economists have said the tens of millions of unemployed workers underscores the need for another aid package. The White House and Congress are working on the next wave of relief, with negotiations seeking to strike a balance between a sweeping $3.5 trillion package proposed by Democrats and a $1 trillion cap sought by Republicans.