Earlier this month we learned that employment in America continued to bounce back in July, and just-released regional data from the U.S. Department of Labor confirmed that such improvements occurred across most of the country. In fact, nonfarm employment increased in 40 states in July, decreased in one state (New Mexico), and was essentially unchanged everywhere else. The largest percentage increases occurred in New Jersey (+3.6 percent), Rhode Island (+3.1 percent), and Michigan and Missouri (+2.7 percent each). As for joblessness, the unemployment rate fell in 30 states in July, climbed in 9 states, and remained stable everywhere else. Massachusetts again had the highest unemployment rate in America (16.1 percent), followed closely by New York, which saw its rate of joblessness climb to a record 15.9 percent in July. Looking ahead it is likely that the labor market recovery “re-broadened” in August as headwinds from the “second wave” of the coronavirus abated. This will not be confirmed until the next job report and supplemental regional data are released in September, but higher frequency metrics have been encouraging.
For example, continuing claims for unemployment insurance, i.e. Americans receiving jobless benefits for longer than a week, have fallen this month to the lowest level since April. Further, COVID-19 hospitalization rates have plummeted in most of the second wave “hot spot” states, which could lead to consumers in these regions to start normalizing their spending behavior once again. This is important because rising customer demand is the best predictor of future job creation. However, there is also still a very long way to go before we can say that the labor market has returned to “normal,” especially with over 24 million people continuing to collect some form of unemployment assistance from the government and the national rate of jobless remaining nearly three times the pre-pandemic level. Another thing to watch going forward will be the reopening of schools across the country. Even with the blanket lockdowns being lifted many parents have likely struggled to return to work without schools able to fill the daycare role. Should there be a rush to shut down the schools again if there is a flareup in students testing positive for the coronavirus then this could derail the latest reacceleration in the recovery. If the pandemic continues to be brought under control, though, then the recovery can gain more momentum. This is still the base case for many firms, and a recent Willis Towers Watson poll even found that “most U.S. companies are planning to give employees pay raises and annual bonuses next year despite the economic fallout from the pandemic.” Moreover, companies are projecting an average salary increase of 2.8 percent for all employees in 2021, and 76 percent of firms expect to award annual performance bonuses next year.
Sources: Econoday, U.S. DoL, BofAML, BIG, WTW, FRBSL