Zillow Market Pulse: August 7, 2020

August 7, 2020

The labor market continued to improve in July but at a much slower pace than in the previous two months. The economy added 1.8 million jobs and the unemployment rate fell by nearly a percentage point. But the pullback in job growth suggests that the labor market recovery has stalled, a dangerous development at a time when joblessness remains at historically high levels.

Headline figures suggest that the job market continues to improve…

• The economy added 1.8 million jobs in July
• The official unemployment rate fell 0.9 percentage points to 10.2%

…But the report's good news came with some bad…

• Measures of core/persistent unemployment improved in July
• But the number of people losing their jobs remains very high

…And showed that the labor market has a long way to go before being fully recovered.

• More than half of the jobs lost from February to April have not yet been recovered
• The unemployment rate remains higher than it was at any point in the Great Recession

So what?

Today's highly anticipated release of July jobs figures offered some encouraging signs of the state of the labor market but mostly provided a sobering view of how far the market's delicate recovery has to go before it is fully healed. The report's positive news was baked into the headlines. Nearly 2 million jobs were added to the economy in July – much less than June but still a notable gain and far more than what the ADP private payrolls earlier in the week indicated could be coming – and the headline unemployment rate fell on the month. Perhaps the most encouraging news was found in an alternative measure of joblessness. Depending on the measure, levels of persistent unemployment – essentially job losses that are not deemed temporary — fell or flattened in July from June. These so-called measures of "core unemployment" are a useful way to measure sustained joblessness, or the share of people who are unlikely to be called back to work even if businesses continue to reopen. So, while the level of core unemployment is still high, today's reported improvement offers some encouraging news.

 That said, the report's discouraging news outweighed any positive developments. The labor force participation rate fell slightly in July, meaning even more people became detached from the market in July, something that will prolong the labor market's recovery. 3.5 million people moved from employed to unemployed in July – slightly less than in June but still a very high total – suggesting that many businesses continue to fail several months into the pandemic. Disparities in unemployment rates across racial lines have widened. And while the headline number of state and local government jobs rose in July, that improvement is entirely due to a seasonal adjustment factor that artificially inflated the job gains — temporary layoffs in fields like public education occurring earlier this year than in years prior. 

The key takeaway from today's report is that the labor market still has a long way to go in its recovery. The pace of improvement slowed noticeably in July at levels that are still alarmingly poor, the headline unemployment rate is still higher than it was at any point during the Great Recession, and after several months of unprecedented monetary and fiscal support, the economy has recovered just 42% of the jobs lost from February through April. If the market were to continue at July's pace of improvements – which, in normal times, would be remarkably strong but these days is quite tepid – it would take another eight months to reach February levels. And worst of all, this deceleration is taking place as key relief programs expire and a new spending bill remains elusive. Today's report easily could have been worse, but the slowing improvements in the labor market is a worrisome sign for the economy.

Click here to read past editions of Zillow’s Market Pulse updates.

The post Zillow Market Pulse: August 7, 2020 appeared first on Zillow Research.

via Zillow Market Pulse: August 7, 2020