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U.S. Economy Created 4.8 Million Jobs in June as Lockdowns Eased

Published 2020-07-02, 08:40 a/m
Updated 2020-07-02, 08:41 a/m

By Geoffry Smith

Investing.com --The U.S. labor market extended its recovery from April’s collapse in June, creating over 1.5 million more jobs than expected as lockdown restrictions across the nation were eased.

U.S. stock futures extended their premarket gains on the back of the news. By 8:47 AM ET (1247 GMT), the Dow Jones 30 Futures contract leaped 170 points from its pre-publication level to be up 1.6% from the previous session's close. The Nasdaq 100 Futures contract was up 1.0%, while the S&P 500 Futures was up 1.3%.  U.S. Crude Oil futures also extended their overnight gains to be quoted at $40.22 a barrel, up 1.0%.

The Labor Department said nonfarm payrolls rose by an estimated 4.800 million in the month to mid-June, compared to an average forecast ahead of time of 3.000 million. An upside surprise had been on the cards after an unexpectedly strong report on private payrolls from ADP (NASDAQ:ADP) on Wednesday. 

Over 3 million of the 4.8 million jobs added were in the retail, leisure and hospitality sectors, which had all been paralysed by the imposition of lockdowns and other social distancing measures in March and April.

The government’s data also showed the jobless rate falling to 11.1% from 13.3% in May, although the Bureau of Labor Statistics said that the jobless rate could actually be a full percentage point higher if workers recorded as employed but absent from work due to “other reasons” had been classified as unemployed.

Other sectors to report a big rebound in employment included manufacturing, where payrolls grew by 356,000, adding to the 250,000 jobs created by the sector a month earlier. One negative outlier, noted Harvard Professor Jason Furman via Twitter, was at the level of state government, which shed another 25,000 jobs in June. 

"This is the fourth month in a row that state governments have lost jobs. And it will only get worse without fiscal relief," Furman argued.

There was a bigger fly in the ointment, too, as more up-to-date and higher-frequency numbers showed that the recent trend of improving labor market conditions was flattening out. 

Initial jobless claims last week came in at 1.427 million, barely down from 1.482 million a week earlier and again above consensus forecasts for a drop to 1.355 million.

Continuing claims, which are reported with a one-week lag, edged up to 19.29 million from an upwardly revised 19.23 million a week earlier, disappointing hopes for a decline to 19.00 million.

Gregory Daco, an analyst with Oxford Economics, pointed to "another worryingly small decline in initial claims" and said that while payrolls have risen by a net 7.5 million over the two months to mid-June, "layoffs are still happening."

Daco noted that the net loss of jobs since February was still over 14 million.

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