The American economy gained 1.8 million jobs last month, even as the coronavirus surged in many parts of the country and newly reintroduced restrictions caused some businesses to close for a second time.
Still, the increase reported Friday by the Labor Department was well below the 4.8 million jump in jobs in June and a sign that momentum is slowing after a burst of economic activity in late spring. The unemployment rate fell to 10.2 percent.
By Allison McCann·Unemployment rates are seasonally adjusted. The government began collecting standardized unemployment statistics in 1948.·Source: Bureau of Labor Statistics
“The labor market continues to heal, which is encouraging, but there is a long road ahead,” said Michelle Meyer, head of U.S. economics at Bank of America.
She noted that 42 percent of the jobs lost since the pandemic hit had now been recovered, but warned the remainder would be harder to make up.
“In the very early stages of the recovery it’s easier to bring back workers quickly just to have a functioning operation,” she said. “It’s not a snap back to pre-Covid levels by any means. It’s a healing process.”
But dig a little deeper and the picture isn’t so bright.
The Labor Department’s U-6 measure, which includes discouraged workers who have given up the search for work as well as those who are in part-time jobs because they can’t find full-time positions, stands at 16.5 percent, seasonally adjusted.
The U-6 figure has come down from 22.8 percent in April. Still, the U-6 is among a series of data points that underscore just how difficult the labor market remains for those out of work.
“The rate of churn in the labor market remains incredibly high,” concluded Morgan Stanley’s economics team. In plain English, that means millions of workers finding a job only to be fired soon afterward, or being let go permanently after assuming a layoff was temporary.
“I think the U-6 is a better indicator of the job market than the 10 percent unemployment rate,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “The traditional unemployment rate doesn’t capture what’s happening on the ground.”
G/O Media, the publisher of The Onion, Gizmodo, Jezebel and several other websites, laid off more than a dozen staff members in its video department Friday, prompting accusations from the employees’ union that websites’ editors in chief had not been consulted.
A G/O Media spokeswoman said that 15 employees had been let go. A statement said the decision was necessary to allow the company to invest in other areas.
“In our efforts to strengthen editorial teams at G/O Media, we completed a thorough evaluation of our traffic and sites,” it said. “In doing so, we’re making the unfortunate but necessary decision to change our current process of video production.”
But in a statement posted on Twitter, the GMG Union accused the company of taking the video department’s legs out from under it.
“Instead of working with editorial leadership to figure out how to execute a successful video strategy,” it said, “they laid off many talented and vital staff members, leaving a serious gap in sites’ abilities to produce any videos at all.”
In April, G/O laid off 14 workers in response to the coronavirus pandemic, which has caused a sharp drop in advertising.
But the media company had been struggling before the pandemic. Last fall, nearly two dozen employees resigned from the sports news site Deadspin after its acting editor in chief was fired, causing the sports blog to fall silent for several months. Also that fall, G/O shuttered Splinter, a politics-focused blog.
G/O is owned by the Boston private equity firm Great Hill Partners, which purchased what was then known as Gizmodo Media Group from Univision in April 2019. Univision in turn had bought several of the sites from Gawker Media, which had filed for bankruptcy in 2016 following a $140 million judgment in an invasion-of-privacy lawsuit secretly bankrolled by the Silicon Valley executive Peter Thiel.
During the pandemic, wealthy families have continued to use their investment pools, known as family offices, to gain access to the type of high-return opportunities once reserved for institutional investors. But they are taking a more hands-on role in those financial decisions.
These family offices have chosen to bypass private equity and venture capital funds — which have high minimum investments and sizable fees — to invest directly in companies, either by themselves or with other significantly wealthy families, a report released on Friday found.
Half of all family offices in the world make direct investments in companies, according to the report, which was released by Fintrx, a data and research company, and sponsored by Charles Schwab’s family office arm.
“Family offices add value in times of crisis,” said Russ D’Argento, founder and chief executive of Fintrx. “That’s a big component of how they stand out and can be different from other fund structures.”
With so many distressed companies looking for investors in the pandemic, family offices have an opportunity to leverage the “family alpha,” or the operating knowledge that a family has in the area from which its wealth came, said Kristi Kuechler, managing director of client relations at Vernal Point Advisors, a multifamily office.
“There are families who have as much knowledge of a sector as a private equity firm,” Ms. Kuechler said.
The Canadian government said on Friday that it planned to impose tariffs on aluminum products from the United States, in a tit-for-tat response to a similar measure announced by President Trump on Thursday.
Canada’s tariffs, on “aluminum and aluminum-containing products from the U.S.,” will take effect by Sept. 16 and will remain in place until the United States eliminates its tariffs, the Canadian government said in a statement on Friday.
The statement included a list of products that might be subject to the tariffs, from aluminum wire to refrigerators and washing machines.
President Trump said Thursday that he would impose a 10 percent tariff on Canadian aluminum in an effort to help struggling American producers. In a speech at a Whirpool factory in Clyde, Ohio, Mr. Trump accused Canada of “taking advantage of us as usual.”
In early 2018, Mr. Trump imposed tariffs on steel and aluminum from Canada, Mexico and the European Union, which caused those countries to impose their own tariffs on good from the United States. The tariffs from Canada and Mexico were not lifted until the next year.
With 13 million fewer people working since the pandemic hit, according to the monthly jobs report released on Friday, the economist Kenneth S. Rogoff — an expert on financial crises — says the American economy is at a precarious point.
“We are going to clock the worst recession since the Great Depression, regardless of how fast we bounce back at this point,” he said. “The virus is coming back, hard and fast. It really does look like this is going to have profound long-term impacts.”
A Harvard University professor, Mr. Rogoff is a noted historian of economic calamities. His books include “This Time Is Different: Eight Centuries of Financial Folly,” written with Carmen M. Reinhart in 2009.
Mr. Rogoff said the current state of virus was reminiscent of 1918 Spanish Flu, in which the second wave of virus proved even more devastating from an economic and public health perspective than the first. At this point, the economic damage from the coronavirus has far surpassed the 2008 recession, he said.
Small businesses will be hit hardest, Mr. Rogoff said.
“We’re going to start to see a lot of small businesses fall by the wayside, a lot of people who are unemployed become chronically unemployed,” he said. “We’re in very, very dangerous territory.”
Large corporations will be more shielded from the impact of the virus, accelerating their ability to crush smaller competitors, a trend that the United States has been experiencing over the last 40 years, he said.
“They have cash reserves to survive this,” he said. “And so their monopoly power is going to grow.”
Industries are rebounding, but none have fully recovered
Cumulative change in jobs since July 2016, by industry
By Allison McCann·Data is seasonally adjusted.·Source: Bureau of Labor Statistics
Despite renewed restrictions on business activity in some parts of the country, the leisure and hospitality industry managed to show some signs of life in July, gaining 592,000 jobs, or one-third of the total gain in payrolls for the month.
The sector was among the hardest hit when restaurants and bars closed abruptly in March as the pandemic hit. July’s increase follows a jump of 3.4 million in May and June, seasonally adjusted, but still leaves employment in the leisure and hospitality field 4.3 million below where it was in February.
Retail, another hard-hit sector which has seen numerous bankruptcies in recent months, added 258,000 jobs.
“Retail and leisure and hospitality are two of the sectors most sensitive to coronavirus, and I was pleasantly surprised by the pace of job creation there,” said Michelle Meyer, head of U.S. economics at Bank of America.
The plunge in employment in these sectors hit lower-paid workers especially hard, including millions who depend on tips. For big increases in hiring at restaurants and bars, employees may need to wait until indoor dining is again permitted in states like New York — something unlikely to occur until a vaccine is found.
Employment in state and local government arrested its decline in July — but the change was largely the result of a quirk in how the numbers are adjusted, and it left the combined work forces much smaller than February.
Local governments have cut about 970,000 jobs since the month before the pandemic took hold, while state governments now employ 200,000 fewer people, on a seasonally adjusted basis. Combined, they have shed nearly 6 percent of their pre-pandemic work force.
Economists and policymakers are concerned that the job losses will continue as local government budgets come under extreme strain. While July offered what seemed to be a reprieve, with state and local hiring ticking up, the improvement was heavily driven by education hiring as seasonal adjustments made the numbers look rosier. On an unadjusted basis, the figures showed continued declines.
“Typically, public-sector education employment declines in July,” the Bureau of Labor Statistics said in its release, but “declines occurred earlier than usual this year due to the pandemic, resulting in unusually large July increases” after the seasonal adjustment.
Aid to state and local governments remains a flash point in negotiations over a new federal relief package. Democrats are pushing for more assistance, something that congressional Republicans and the White House have resisted or opposed.
The Federal Reserve and Treasury Department have established a program to buy short-term municipal debt from certain state and local governments, but it has not been used much. The terms are not generous, experts have said, and many local governments are hoping for grants rather than loans that they would have to pay back.
Without help, further job losses could be in store.
“Unlike small businesses or restaurants — which respond immediately to economic shocks — deep budget and job cuts in state and local government will likely grow in the next few months and fester for years to come,” researchers at the Brookings Institution wrote in a recent post.
Stocks on Wall Street lost their footing on Friday, as investors moved cautiously amid escalating tensions between the United States and China and little indication that lawmakers in Washington were close to resolving their differences over the next economic aid package.
It helped, somewhat, that the monthly employment report showed that American employers added 1.8 million jobs in July, continuing a rebound that began earlier this year. But even in that report there were reasons for caution: The rate of hiring slowed substantially from June, and the unemployment rate remained above 10 percent.
After recouping early losses, the S&P 500 was essentially unchanged by the end of trading Friday. Technology stocks that have led shares higher in recent days tumbled on Friday, with the Nasdaq composite down nearly 1 percent as Apple, Amazon, Alphabet and Microsoft all declined.
Hanging over Wall Street was President Trump’s decision late Thursday to order sweeping restrictions on two popular Chinese social media networks, TikTok and WeChat. Two executive orders cited national security concerns in barring transactions with WeChat or TikTok by any person or property subject to the jurisdiction of the United States. The orders take effect in 45 days.
The moves are expected to prompt retaliation from China. A Chinese Ministry of Foreign Affairs spokesman called the executive orders a “nakedly hegemonic act.” Shares in Tencent, the parent company of WeChat, fell almost 6 percent, and markets in Asia dropped.
Investors were also watching talks in Washington over what shape another economic aid package would take. Federal unemployment benefits, a moratorium on evictions and aid for small businesses shuttered during the pandemic hang in the balance, and economists have repeatedly warned that failure to extend the assistance could imperil the American economy.
On Friday, negotiations between the White House and Democrats stalled, as both sides said they remained deeply divided on the package. President Trump’s advisers said they would recommend that he bypass Congress and act on his own to provide relief.
Here’s some of the news you might have missed.
The Evening Standard, a free daily newspaper in London, is planning to lay off 139 employees, or about a third of the staff, as well as other noncontract workers. The paper’s main readership — commuters in central London — has all but vanished because of the pandemic, but the company was already facing financial difficulty, having reported a pre-tax loss of £13.6 million ($17.8 million) last year. A spokesperson said the company would focus on growing the paper’s digital and live events business. .
Uber said on Thursday that its revenue in the second quarter dropped 29 percent to $2.2 billion from a year ago and that its net loss narrowed to $1.8 billion, as the ride-hailing giant deals with the fallout from the coronavirus pandemic. The revenue decline was the steepest since Uber went public in May 2019.
Rupert Murdoch’s News Corp reported a $401 million loss for the three months ending in June, with much of the decline related to impairment charges for some of its assets in Britain and Australia and restructuring costs related to the coronavirus pandemic. The company revealed for the first time financial details of its Dow Jones division, the group that publishes The Wall Street Journal. The unit was News Corp’s only growing business on an annual basis.
With operations ceased for the entirety of the quarter and most of its employees laid off or furloughed, AMC Entertainment, the largest theater chain in the United States, posted a quarterly loss for the period ended June of $561.2 million. Revenues totaled $18.9 million, a 98.7 percent plunge from the same period last year for the Kansas-based company. The coronavirus has laid waste to AMC’s 1,000 theaters scattered across the globe, calling into question whether it would be able to stay financially viable.
The Trump administration is considering forcing Chinese companies to delist their shares from stock exchanges in the United States unless they share their audits with American regulators, a move that would further ratchet up tension between the world’s two largest economies. The President’s Working Group on Financial Markets recommended the move in a report released on Thursday as a way to protect American investors from what it described as the risks posed by Chinese companies.