President Donald Trump speaks to journalists in the Brady Press Briefing Room at the White House on July 2, 2020. The President addressed reports that the unemployment rate had dropped to 11.1%.
Chip Somodevilla / Getty Images
The US unemployment rate is at its lowest in months, and the economy created a record number of jobs in June.
"The big American comeback continues!" MP Fred Keller, R-Pa., Tweeted after the Bureau of Labor Statistics employment update on Thursday morning.
President Trump cited the news as evidence that "the economy is collapsing."
However, according to economists, there are many reasons to mitigate these positive vibrations.
The employment crisis is still worse than ever since the Great Depression, the worst economic downturn in the country in its industrial history.
At least 10 million people are unemployed than before the pandemic. Layoffs, once considered temporary, have led to permanent job loss. Millions still apply for unemployment benefits every week.
The employment situation could stall or reverse as soon as the additional unemployment benefits expire after July and companies take advantage of government aid to support payroll.
States also had to stop or reverse their plans to reopen due to a flare-up of a coronavirus infection.
"The outlook is not too bright," said Ioana Marinescu, assistant professor of economics at the University of Pennsylvania. "I don't think we're not in the forest at all."
The unemployment rate fell to 11.1% in June, a significant improvement from 14.7% in April and 13.3% in May.
However, towards the end of the global economic crisis, these values are higher than ever in six decades.
In comparison, the unemployment rate peaked at 10% during the Great Recession a decade ago. There is also a significant reversal of 3.5% in February.
Since April, the peak of the employment crisis caused by the corona virus, around 5 million Americans have left unemployment.
But there are still about 12 million people out of work who had one in February.
"Obviously it's still very bad. It's just the (June) numbers that weren't as bad as (May)," said Marinescu.
Permanent job loss
The proportion of layoff workers continues to decrease, suggesting that many of them were called back to work when the companies reopened their doors.
However, part of this momentum is likely due to the fact that these layoffs will be lost permanently as companies are finally closed down or unable to support such large staff due to economic pressure.
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The number of permanent job losses rose to 2.9 million people in June – according to the Bureau of Labor Statistics, this has increased by around 1.6 million people since February.
While some workers on leave still receive benefits such as health insurance from their employer, this does not apply if they permanently lose their job.
The number of people who are considered "long-term unemployed" – those who have been unemployed for at least 27 weeks (or longer than six months) – increased by 227,000 to 1.4 million from May to June, according to the Presidium.
This is a riskier period of unemployment. It will generally be more difficult to find a job if unemployment lasts longer – and will be particularly difficult in the currently dark labor market.
There are also signs that the economic recovery is stalling.
Kronos, which provides the company with workforce management software, said that hourly shifts have slowed down in recent weeks.
In May, the number of shifts worked weekly rose nationwide by around 2% to 3%, according to Kronos. This growth has halved in the past month.
The company tracks around 14 to 16 million shifts a week.
"The pace of these gains has definitely slowed in the past two weeks," said Dave Gilbertson, vice president of strategy and operations.
Many states have had to interrupt their reopening plans or shut down certain industries due to rising Covid 19 infection rates.
Texas and Florida, for example, closed bars again. The California governor announced some stricter restrictions on facilities such as restaurants and wineries.
The New York Mayor Bill de Blasio postponed indefinitely a plan to allow the indoor dining service again.
Such plans can result in companies firing their employees due to the closure or reduction in consumer activity.
"Don't be confused by the size of the rebound – it's still a partial rebound as more (temporary) layoffs are turned into permanent," said Arindrajit Dube, professor of economics at the University of Massachusetts Amherst, in a tweet. "And we are facing a lot of headwind (new closings)."
Millions of people are still applying for unemployment benefits. According to the Department of Labor, only 1.4 million Americans claimed benefits last week.
Even if things weakened rather than worsened, that would be bad news for the United States.
"If things stay that way, it's just terrible," said Marinescu. "It's like the worst economy we've seen since the Great Recession, so there's no reason to celebrate."
The unemployment benefit ends
In the meantime, federal aid that supports employment and household income will soon expire unless Congress passes additional aid measures.
Economists fear that this could lead to further layoffs after July as companies close and consumer spending declines.
Americans who receive unemployment benefits receive an additional $ 600 per week supplement in addition to their state unemployment benefits. It expires after July 31st.
Companies that have received a loan through the Paycheck Protection Program may also be on the verge of exhausting these funds.
Borrowers could apply for the loans for the first time in early April. They first had to spend the funds within eight weeks for the loan to become a federal grant. This requirement was recently changed to 24 weeks.