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The nation got some much needed positive economic news on Thursday. According to the Bureau of Labor Statistics, the US added 4.8 million jobs in June. The unemployment rate fell to 11.1%.
June’s strong numbers beat expectations. They also follow a surprise growth in jobs in May, when 2.5 million jobs were added. Economists had actually predicted job losses in May.
What Caused The Huge Gain?
The huge numbers are a direct result of the unprecedented shutdown that occurred in April. Almost every state shut down its economy to some degree, and this led to record layoffs. Over 22 million jobs were lost at least temporarily.
The unprecedented halt into the economy has led us to see numbers bigger than we ever have before, both positive and negative. The unemployment numbers were stunning in the first few weeks of the shutdown.
The Bad News
Unfortunately, the news wasn’t all good. Over 1.4 million people filed for unemployment benefits for the first time. While this number is down from the peak of the shutdown, it is still astronomically high by historical standards. To put that figure into perspective, the long term average is around 350,000.
Perhaps most troubling, the weekly unemployment claims number seems to be flattening out. They peaked at 6.8 million back in March and have come down, but the rate of decrease is slowing.
The other troubling sign is the resurgence of the coronavirus in mid-June. Daily cases have surged to record levels, and some states have started putting restrictions back on businesses. As bars and beaches are forced to temporarily close, jobs will inevitably be lost.
Long Term Outlook
There are both glimmers of hope and troubling signs in today’s report. On the one hand, the economy has somewhat bounced back from a catastrophic shock to the system. The US adding 4.8 million jobs in June is a great sign. It has shown real resiliency in the face of tremendous adversity. This was of course helped by unprecedented government intervention via expanded unemployment and the PPP.
On the other hand, there are some storm clouds ahead for the economy. The end of the expanded unemployment is coming upon us quickly. Once it expires, a lot of money will be coming out of the economy. The previously mentioned renewed restrictions are also going to place downward pressure on the economy.
As a result of these conflicting data points, expect tense negotiations in Congress over new stimuli. Democrats have already passed a new rescue package that included a new round of $1200 checks for Americans, as well as extending the extra unemployment until January. Republicans have opposed the extra unemployment being extended.
The president has come out in favor of new stimulus checks and even hinted they could be larger than the $1200 proposed so far. With so much uncertainty, some form of stimulus seems highly likely.