Leisure and Hospitality Leads July Job Gains
It is unheard of for the U.S. economy to add more than a million jobs in a single month and for that to be met with anything but extreme optimism. Yet, that is not entirely the sentiment for the 1.8 million jobs gained in the U.S. in July 2020. The great news is that recruiting firms and hiring managers refilled a significant number of vacant positions, but the mood is more of caution and uncertainty, as COVID-19 infection rates have risen and slowed the pace of the recovery.
The nation still has almost 13 million jobs to recoup from the early stages of the pandemic, and the pace of recovering those jobs slowed last month. July’s job gain, while still incredibly strong, was down 63.0% from June’s record number. Despite the sequential moderation, July 2020 still registered as the third largest month of job gain in U.S. history behind the back-to-back record-setting months of May (2.7 million) and June (4.8 million) this year.
A pullback in the pace of the recovery was expected. A variety of data, such as the Census Bureau’s weekly household pulse survey, suggested that a stall in momentum was beginning to take hold in late June. The simple fact appears to be that until the virus is under control, a more pronounced rebound will be difficult. Consider, one-third of the jobs that remain open are in the leisure and hospitality industry, one that heavily relies on close proximity to other people. With cold and flu season approaching, it will likely add more noise to the situation as even those with mild symptoms could be prohibited from entering restaurants or attending in-person school, the latter having an impact on parents’ work schedules.
Recent reports state that a vaccine could become widely available by early 2021, which lines up with the projections of LaborIQ® by ThinkWhy® that suggest more moderate job growth through the beginning of next year, followed by a more substantial path to full recovery through late 2023. Until then, many will be watching the moves from Capitol Hill to see what stimulus packages will help bridge the gap.
Why It Matters
July’s job gain of 1.8 million continued to fill the hole of jobs loss created in March and April, but there is still a lengthy road to make it back to the previous norm. Businesses will have to maintain strategic focus as they continue to navigate the period from now until COVID-19 is under control.
As businesses plan for growth and continue to find new opportunities, they can:
- Keep a pulse on labor market performance and the impact to your location and industry.
- 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 has now gained more than 9.3 million jobs in the past three months. In addition, total nonfarm payroll average hourly earnings increased by 0.2% year-over-year ending in July 2020. The figure is coming back into balance after much stronger gains in recent months that were skewed based on changes in the underlying workforce being measured.
The question remains whether the economy can continue to gain significant traction, but the most recent unemployment insurance claims report from August 6 gives some hope. Leading up to the report’s release, it appeared a lull was occurring in the speed with which jobs were being refilled, as the trend line for claims was flattening. Then initial unemployment insurance claims fell below 1.2 million for the week ending August 1. It was the lowest weekly total for initial claims since the spike in March, and continued claims for the week ending July 25 dropped by 844,000 from the previous week.
Industry Movement (Survey Reference Week July 12-18)
INDUSTRY RECOVERY TRACKER
Leisure and Hospitality
Leisure and hospitality hiring continued to claw its way back in July, with the industry adding 592,00 jobs, roughly one-third of the overall U.S. job gain for the month. The industry was cut in half during the depths of the job loss in April. It has had a significant rebound, with close to 4 million jobs added in the last three months, but is still down 4.3 million jobs from February and is at approximately 74% of its pre-COVID-19 employment level.
Subsector impact: The subsector of food services and drinking places (restaurants and bars) once again accounted for the lion’s share of the gain, with 502,000 jobs added. Arts, entertainment, and recreation account for most of the rest of July’s gain with 87,000 jobs added. Accommodations, which picked up 219,000 jobs in June, only added a seasonally adjusted 3,000 jobs in July.
Trade, Transportation, and Utilities
Trade, Transportation, and Utilities added 291,000 jobs in July, upping its three-month total to more than 1.6 million jobs added since April. The sector is currently at 94% of its employment level relative to February.
Subsector impact: Retail trade was once again the big gainer. It added 258,000 jobs in July and has added almost 1.5 million jobs since April as consumers have been venturing to stores as restrictions have loosened the past few months. Clothing stores continued to be a major beneficiary of the reopenings, adding 121,000 jobs in the month. Food and beverage stores lost jobs (-19,000) in July, but they still had roughly 25,000 more employees than in February as they benefited from increased demand related to the pandemic.
Education and Health Care Services
Education added 23,500 jobs in July, but it was still down 355,000 jobs since February. It was at roughly 90.7% of its pre-pandemic employment level in July. Healthcare and social assistance added 191,400 jobs in July, and it was at 94% of its pre-pandemic level in July.
Subsector impact: Offices of dentists (45,000), hospitals (27,000) and offices of physicians (26,000) saw the biggest lift in July. Job losses continued in nursing and residential care facilities, which has lost jobs every month since the pandemic began. July’s loss of 28,000 jobs brought the five-month total to -219,800 for the subsector.
Professional and Business Services
Employment increased by 170,000 in July. It is at 92.3% of its employment level from February, and it has approximately 1.6 million jobs left to regain. The major note is temporary help services (144,000) made up practically all the month’s gain, as business are trying to find a foothold in the current economy.
Employment increased by 26,000 in July. Motor vehicles and parts recovered 39,000 jobs, but other subsectors, such as fabricated metal products (-11,000), offset the gains. Overall, manufacturing is still down 740,000 jobs from February, and is at 94% of its pre-pandemic employment level.
Government employment increased by 301,000 in July, but it remained 1.1 million below its level from February. Its level of employment in July was 95% of February’s level.
Subsector impact: Federal government has grown since the pandemic began, adding 45,000 jobs (+1.5%) since February. Local government added 241,000 jobs in July, but it stood at 93% of February’s employment level.
Financial activities added 21,000 jobs in July, but the real story is how well it has held up through the last several months. In July, the industry still had 97.6% of the jobs it had in February. It is poised to be one of the first industries to fully recover all jobs lost during the pandemic.
Growth was minimal for construction in July relative to other industries, adding 20,000 jobs from the previous month. The industry is at 94% of its employment level from February, meaning there are 444,000 jobs left to regain.
Subsector impact: Almost all of the monthly gains (16,000) were in residential building, which was at 97% of its employment level from February in July.
For July jobs figures reported by the BLS, it is important to remember that the July 2020 survey reference week for the BLS household survey is July 12-18.
LaborIQ by ThinkWhy monitors and forecasts labor market performance at all levels, measuring impact to MSAs, industries, occupations and businesses across the U.S.