Economy sees 'blockbuster' jobs report though coronavirus threats remain
Thursday’s employment report exceeded expectations, as jobs were added and the unemployment rate fell for the second month in a row.
This news shows improvements in the labor market reflected in the continued resumption of economic activity that had been curtailed in March and April due to COVID-19 pandemic and efforts to contain it.
The U.S. economy continues to head in the right direction, according to Edward Moya, senior market analyst at OANDA.
“Financial markets are heading into a long weekend on a high note after a blockbuster jobs report showed [close to five million] jobs were created, the most since records began in 1939,” Moya said. “The trajectory of the economic recovery remains V-shaped and as the extraordinary coronavirus uncertainty will justify the Fed’s aggressive easing stance.”
Moya noted that President Trump’s signal that he wants more money for individuals affirms the belief he will try to make the economy as strong as possible before November.
Nonfarm payrolls rose 4.8 million in June after increasing by 2.7 million the prior month. The unemployment rate declined to 11.1% in June from 13.3% in May, the U.S. Bureau of Labor Statistics reported on Thursday.
“With nearly 5 million jobs added in June, the economy continues to heal but remains hobbled from the COVID-19 pandemic and related restrictions,” said Mark Hamrick, senior economic analyst at Bankrate.com. “Leisure and hospitality, including bars and restaurants, as well as retail had led the way down and are leading the way back up."
Economists polled by IFR expected 3.074 million jobs added and an unemployment rate of 12.3%.
"The unemployment rate remains above the historically high levels seen during the Great Recession of a decade ago,” Hamrick said. “Including the correction related to the continued challenges associated with classifying those who are absent from work, the jobless rate was lower but still elevated at 12% or so. The Labor Department indicates this statistical issue was less significant than in past months."
Initial jobless claims fell to a seasonally adjusted 1.427 million in the week ended June 27, from the previous week’s upwardly revised level of 1.482 million, originally reported as 1.480 million, the Labor Department said Thursday.
"It is a welcome sign to see both new jobless claims and continuing claims on the decline,” Hamrick said. “Still, they remain extremely elevated and tell a story of continued stress for our society and individuals struggling to get by."
Economists projected 1.350 million claims in the week.
"A precarious cocktail of risks sits in front of us between the continued prevalence of the virus and historically elevated unemployment,” Hamrick said.
Continued claims for the week ended June 20 totaled 19.290 million, a decline from the prior week’s downwardly revised 19.231 million, first reported as 19.522 million.
Economists anticipated 19.0 million continued claims.
“The headline better-than-expected gain garnered much of the attention, but continuing claims increased, suggesting a large part of the jobs are still not coming back,” Moya said. “The labor market is improving, but rising virus case counts across the Sunbelt will derail the hiring of many individuals as state reopenings stall.”
Moya added that average hourly earnings declined, which suggest that “lower-paid jobs are coming back.”
The largest increases in initial claims for the week ending June 20 were in California (43,070), Maryland (9,099), Florida (7,535), New Jersey (6,589) and Indiana (5,314), while the largest decreases were in Oklahoma (26,166), Kentucky (12,804), Oregon (8,371), Georgia (6,272), and New York (6,119).
"Looking beyond the June employment data, worrisome signs have emerged in recent days regarding a pullback in store traffic and spending likely linked to the resurgence of COVID-19,” Hamrick said. “While the economy is widely thought to be rebounding now that we’ve quietly slipped into the third quarter, the strength and sustainability of the rebound remain at risk."
The international trade deficit grew 9.7% to $54.6 billion in May from a revised $49.8 billion in April, the U.S. Census Bureau announced on Thursday.
Economists estimated a $52.4 billion shortfall.
Exports in May declined by 4.4% or $6.6 billion to $144.5 billion and imports were down 0.9% or $1.8 billion to $199.1 billion.
Factory orders increased 8.0% in May after a 13.5% decline a month earlier, according to data released by the U.S. Census Bureau on Thursday.
Economists predicted it to be up 8.3%. The increase in orders this month ended two months of decline.
Shipments moved 3.1% higher to $12.5 billion for the month of May, ending four consecutive months of drops, including a 14% drop-off in April.
Unfilled orders edged up slightly by 0.1%, ending a two month streak of decreases. This followed a 1.5% fall in April.