Job Gains Concentrated in Low-Wage Industries
The U.S. economy experienced another historic month of job gain with 4.8 million jobs added in June, surpassing the record of 2.7 million jobs added in May. To put this in perspective, the combined 7.5 million jobs added in the past two months was more than the 40-month total leading up to the impact of COVID-19. June’s strong growth was boosted by U.S. businesses reopening to various levels based on state and local policies, as well as continuing benefit from the government’s various economic stimulus programs.
However, the pace and sustainability of the recovery is being threatened by a rise in COVID-19 counts in states across the nation. Some states are pausing the lifting of restrictions, or even tightening them in some cases. If the trend continues, the rebound in job growth would likely stall and elongate the road back to the pre-pandemic employment level.
Why It Matters
June’s record job gain of 4.8 million strongly suggests that an economic recovery is underway, particularly for some of the nation’s hardest-hit industries.
As businesses navigate recovery and plan for growth, they can:
- Focus on industry and metro growth performance to identify sales, marketing and business development opportunities.
- Evaluate talent and location strategies, including for remote hiring, and know the pay differentials across markets.
- Measure timing and magnitude of job loss and recovery by industry and metro, as variances can dramatically impact investment and operational strategies.
The Recovery Continues
The U.S. economy gained 4.8 million jobs in June, adding to the prior-record 2.7 million jobs gained in May. In addition, total nonfarm payroll average hourly earnings increased by 5.0% year-over-year ending in June. On a year-over-year comparison, the reduction of many low wage jobs contributed to the strong wage growth. On a month-to-month basis, average hourly earnings declined 1.2%. Combined with six consecutive weeks of generally decelerating total unemployment insurance claims, these are indications the U.S. is seeing signs of recovery. The question now is whether it can be sustained.
Industry Movement (Survey Reference Week June 7-13)
INDUSTRY RECOVERY TRACKER
Leisure and Hospitality
Subsector impact: Leisure and hospitality hiring surged in June, with the industry adding 2.1 million jobs. The subsector of food services and drinking places (restaurants and bars) accounted for most of the gain, with 1.5 million jobs added. With casinos reopening, the amusements, gambling, and recreation subsector added 353,000 jobs.
Recovery outlook: Restaurants and bars have started to recover jobs quickly, but the subsector experienced an outsized cut relative to others. There are still roughly 3.1 million fewer jobs (-25%) in those businesses compared to February, and it is practically impossible to return to the previous level until restrictions are fully lifted and people are comfortable returning to previous social behaviors. A similar story can be told for the accommodations sector (hotels,) which still is down 38% from February (-786,000 jobs).
Trade, Transportation, and Utilities
Subsector impact: With restrictions lifting, and consumers’ ability to visit retail shops expanded, the retail trade sector rose by 740,000 jobs, approximately double the 372,000 jobs recaptured during May. The biggest beneficiary for June was clothing and clothing accessory stores, which added 202,000 jobs for the month. Transportation and warehousing added 99,000 jobs for the month.
Recovery outlook: It is questionable whether retail trade will ever bounce back as we knew it before the pandemic. The sector was already heavily impacted by changes in technology, and COVID-19’s influence on social behavior might have moved the industry’s fate ahead by a decade. There will be gains back as stores reopen, but returning to the previous level of employment in the next few years will prove to be very challenging.
Education and Health Care Services
Subsector impact: Health care continued to rebound, with offices of dentists (190,000) and physicians (80,000) seeing the biggest lift. Job losses continued in nursing care facilities (-18,000). Overall, the industry added 568,000 jobs from the prior month.
Recovery outlook: For education, the full opening, or not, of elementary schools could have a very broad ripple effect on the economy. Additionally, college enrollment will be worth watching as we head toward fall. Some universities are better equipped for online courses than others, but enrollment levels are widely projected to decline. Different than other industries, once enrollment is set for the fall, it is locked in for a semester and current demand will not ebb and flow the way of other sectors. In other words, the next two months will be critical.
Professional and Business Services
Subsector impact: As businesses began to staff roles again, temporary-help services benefited by adding 149,000 jobs in June. Additionally, companies returning to working in office buildings likely spurred the 53,000 jobs gained in the subsector of services to buildings and dwellings. Technology-related jobs have generally seen fewer job losses during the recent economic decline, but computer systems design and related services lost 20,000 jobs in June, likely starting to feel some of the pain of the broader economy.
Recovery outlook: The professional and business services industry has been less impacted than some of its peers due to a lower reliance on in-person exchanges to do business. LaborIQ® by ThinkWhy projects this as one of the earliest industries to recover, and certain subsectors, such as those with a technology focus, will be the leaders of the pack as the economy recovers.
Subsector impact: The overall industry added 356,000 jobs in June, but it is still down 757,000 jobs compared to February. For June, motor vehicles and parts (196,000) added more than half of the industry’s overall job growth.
Recovery outlook: Recent data suggest an uptick in manufacturing, but the ability to export goods globally is a major factor that will likely limit industry demand in the months ahead.
Subsector impact: The good news is the recent massive drops in local government started to moderate in June. A component of that subsector, local government education, gained 70,000 jobs, but it was partially offset by losses in state government, which totaled -25,000. The overall Government industry added 33,000 jobs for the month.
Recovery outlook: With tax revenues taking a major hit in 2020, local government will continue to face challenges in the short-term.
Subsector impact: Specialty trade contractors added 135,000 jobs in the month, accounting for practically all the industry’s 158,000 gain.
Recovery outlook: The sector has gained back 56% of the jobs it lost from February to April. This is a very positive sign for the construction industry, given that it never fully recovered all the jobs lost during the last downturn. Following the previous recession, it took 47 months to recoup the equivalent number of jobs gained in just the last two months (61,000). Residential construction has held up very well, with employment only down 5% compared to February. While there is some optimism, demand will likely lag for new construction starts for industries where demand has fallen rapidly (accommodations, retail) as well as those dependent on local tax dollars for funding.
Subsector impact: Real Estate added 18,000 jobs in June out of the industry’s total of 32,000 jobs gained.
Recovery outlook: The industry has held up very well through the last few months, with the finance and insurance subsector only shedding 37,000 jobs (-0.6%) at an aggregate level. The concern moving forward with this industry is that it relies on spending, and if consumers are saving money or have their incomes disrupted for a long period of time, it could have negative impacts on the various financial vehicles in the sector.
For June jobs figures reported by the BLS, it is important to remember that the June 2020 survey reference week for the BLS household survey is June 7-13. This period captures some of the recent rebound but does not contain details from the most recent two and a half weeks.
ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to MSAs, industries, occupations and businesses across the U.S.