The US Labor Department is attempting to stand behind their reporting that the unemployment rate fell to 11.1% as the economy added a record 4.8 million jobs in June. This represents the largest single month gain in new jobs. The number of people continuing to claim regular unemployment benefits in the week of June rose 59,000 to 19.29 million. The June jobs report came following a strong jobs report in May. This is belied by data. In May, 8.3 million workers were classified as employed but absent from work in government data. For some workers, reasons for being absent from work included vacations, illnesses, maternity leave and the like. For nearly two-thirds – 5.4 million workers – the reason for absence from work was recorded as “other,” a number sharply higher than the norm. In February, at the start of the COVID-19 recession, only 600,000 workers were absent from work for other reasons. If the additional 4.8 million workers placed in this category in May were instead listed as unemployed on temporary layoff, the overall unemployment rate would have been 16%, not 13% as officially recorded. This uncounted and unclassified trend continues in June. There is growing evidence that the BLS data can no longer be relied upon.

Despite the claims of strong gains, the US is still digging out from the cellar which it fell into in April, when 20 million jobs were lost due to the impact of the COVID-19 black swan economic event.

The rise in employment was larger than predicted by most economists:

The Asterisk

While the June report is strong upon first impression, the numbers are not fully up to date with fast-moving developments. The BLS utilizes mid-month surveys of households and businesses. Weekly jobs numbers were on the rise at this time two weeks ago, but look to be slipping as the virus has resurged in most states across the country - several of them are economic and employment powerhouses (California, Texas, Arizona, Florida). In reaction, retailers have sharply pulled back on reopening plans. Microsoft announced the closure of all of its stores, Apple has closed 50 stores the affected states, McDonald's has put a halt to its plans to ramp up indoor dining.

The June jobs report reflects midmonth surveys of households and businesses, which happened before state governors and businesses began to react to the upsurge in Covid-19 cases. In the two weeks following the survey, the economic and employment situation has changed for the worse:

• Texas, Florida, Arizona and parts of California have had bars close down. Arizona imposed the broadest restrictions, also closing gyms and movie theaters.
• J.D. Power and LMC Automotive revealed they expect sales will be down about 25% in June to 1.09 million vehicles, supporting a similar forecast by analysts at Edmunds, who expect a drop of 28.7% this month, and have backtracked over the past two weeks
• In an interview with Bloomberg on June 24, the President of the Federal Reserve Bank of Chicago, Charles Evans, said, “My forecast assumes growth is held back by the response to intermittent localized outbreaks, which might be made worse by the faster-than-expected re-openings."‍
• Deloitte's forecast for the US economy assumes that the early reopening will lead to a bigger outbreak that, in turn, will suppress economic activity in the fourth quarter of this year.

This is a developing story, and RNN will continue to follow it.

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