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Economic Forecasts

Pace of Jobs Recovery Slows

Kiplinger’s latest forecast on jobs

July’s pace of rehiring slowed, with 1.8 million rehired compared to June’s 4.8 million rehired. The surge in coronavirus cases in the Southern and Western states slowed hiring there, and which also made the Northeastern and Midwestern states more cautious about fully reopening themselves.

Virus cases appear to be stabilizing, which should allow August hiring to pick up. However, large hiring surges like that in June appear to be over. Weekly initial unemployment claims are falling again after a pickup in July, but remain above 1 million per week, an unprecedented number. The virus has shown the need for continued caution, and the difficulty in getting things back to normal without a vaccine. The leisure and hospitality sector will continue to experience hard times for the foreseeable future.

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The retail sector could be hurt if the bonus unemployment compensation is not renewed. A second stimulus bill is still not a given, though it is likely that something will pass, eventually, because it’s election season after all.

The unemployment rate dropped to 10.2%, from 11.1% in June. The issues that the Bureau of Labor Statistics was having in correctly counting the unemployed were greatly diminished in July’s report, so the reported unemployment rate is close to correct now.

However, there is a long way to go. Total unemployment is still 10.6 million higher than in February. Almost five million more people are still out of the labor force now than in February. Another 4.5 million are still working reduced hours. Employment continues to fall in certain industries that are not recovering well, such as mining, nursing homes, and elderly care.

As more workers return, wage growth will likely be subdued. Hourly earnings rates are elevated right now because so many low-paid workers were laid off that it caused the average wage rate to jump for people who were still employed. As those low-paid jobs come back, the still-high unemployment rate is likely to lower wage growth from the 3% to 3.5% trend seen before the coronavirus crisis.

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