Employers brought back millions more workers in June as businesses began to reopen across the country. But the recent surge in coronavirus cases is threatening to stall the economic recovery long before it has reached most of the people who lost their jobs.
U.S. payrolls grew by 4.8 million in June, the Labor Department said Thursday. It was the second month of strong gains after April’s huge losses, when businesses laid off or furloughed tens of millions of workers as the pandemic put a large swath of economic activity on ice.
But the thaw is far from complete. There were still nearly 15 million fewer jobs in June than in February, before the pandemic forced businesses to close. The unemployment rate fell to 11.1 percent in June, down from a peak of 14.7 percent in April but still higher than in any previous period since World War II. The rate would have been about one percentage point higher, the Labor Department said, had it not been for persistent data-collection problems.
The monthly jobs data was collected in mid-June, before coronavirus cases began to spike in Arizona, Florida and several other states. More timely data, also released by the Labor Department on Thursday morning, showed that 1.4 million Americans filed new claims for state unemployment benefits last week — the 15th straight week that the figure exceeded one million — and another 840,000 filed for benefits under the federal Pandemic Unemployment Assistance program.
Weekly claims increased in Texas, Arizona and several other states, although they fell in other states that have had a resurgence of the virus. Economists fear that layoffs could accelerate now that states have begun ordering some businesses to close again.
“We’re in a very deep hole, and we just set ourselves back again,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “It’s difficult to climb out of that hole.”
The H.Wood Group, which operates a dozen bars, restaurants and nightclubs in the Los Angeles area, had just begun to dig out of that hole when the latest round of shutdown orders hit. The company spent weeks figuring out how to operate safely, installing plexiglass dividers between banquettes, eliminating reusable menus and adopting policies like temperature checks at the door and mandatory masks.
In June, that work appeared ready to pay off: Two of the company’s restaurants reopened, and three bars were set to reopen this week. Customers, eager to eat out after weeks of lockdown, snapped up reservations.
“The first two nights were a little weird,” as people adjusted to masks, face shields and temperature checks, said John Terzian, the company’s co-owner. “But after Night 3, I think people settled in, and honestly it felt perfect.”
Then on Sunday, Gov. Gavin Newsom ordered Los Angeles bars to shut down; on Wednesday, he ordered restaurants to suspend dine-in service as well. Mr. Terzian, who had brought back roughly half his 400-person work force and was on track to bring back the rest, instead had to start telling people they were out of work again. He said he worried that many would leave the industry altogether.
Mr. Terzian said many smaller restaurant businesses might not be able to afford to reopen a second time. And while H.Wood is financially stable, he said, he will be slower to reopen next time, lest the authorities pull the rug out from under him.
“I think we would be really hesitant,” he said. “Staying shut we understood, but reopening and reshutting is just wrong.”
Economists say stories like Mr. Terzian’s drive home a central fact of the crisis: The economy can’t truly begin to recover until the pandemic is under control. Reopening quickly may bring back some jobs, but that rebound won’t last if increased activity brings more virus cases.
“The virus drives the economics,” said Betsey Stevenson, a member of the Council of Economic Advisers under President Barack Obama who is now at the University of Michigan. If cases continue to rise, as health officials warn, “we’re not going to have people going back to work,” Ms. Stevenson added.
“In fact, we’re going to see more people staying home,” she said.
The problem is that the longer the public health crisis drags on, the more permanent damage is done to the economy. Total employment has grown the past two months because companies have begun recalling temporarily laid-off workers. But layoffs have continued as the economic effects of the pandemic ripple through the economy, reaching businesses and industries that were spared earlier.
If businesses can’t reopen, or can return only at a fraction of their previous sales, many temporary job losses are likely to become permanent. The number of people reporting they had permanently lost their jobs rose in June even as the number of workers on temporary layoff fell sharply for the second consecutive month.
“We’re going on four months now,” said Olugbenga Ajilore, a senior economist at the Center for American Progress, a progressive group. “There’s only so long that these businesses can hold out before it just doesn’t become feasible.”
The good news is that the strong job gains in May and June suggest that the permanent economic damage so far has been relatively limited, in part because of the trillions of dollars of emergency spending authorized by Congress. Most of those out of work still say they expect to return to their old jobs eventually, and companies are bringing back furloughed workers at a faster rate than many economists predicted a few months ago.
Hand & Stone, a national chain of massage studios and facial spas, survived the shutdown more or less intact. By Monday, 420 of its 465 locations had reopened, with 35 more expected to do so by the end of this month. Only a handful of locations have closed permanently. And about 70 percent of members continued paying monthly dues during the shutdown, banking massages for the future rather than canceling their contracts.
Todd Leff, the company’s chief executive, said that so far, at least, customers seemed comfortable going back, in part because of strict safety procedures the company had put in place. Sales at open locations are about 22 percent below where they were a year ago, and close to 80 percent of workers at those locations are back on the job. But Mr. Leff said he was still cautious about the longer-run outlook.
“I see a quicker recovery than I think others are projecting and, at least in my industry, less businesses closing permanently,” he said. “But if it goes another 60 days, that could change.”
Economists warn there is another threat looming: the expiration of government assistance, in particular the enhanced unemployment benefits providing an extra $600 per week to laid-off workers. Those benefits are set to expire at the end of this month, potentially eliminating a key source of support not just for the workers but for the broader economy as well.
For those still out of work, the job market remains daunting, particularly for those laid off early in the pandemic, who have now been out of work for months. Juliana Jacobs was let go from her position as a designer of women’s tops at New York & Company in late April and has seen scant openings since then.
“Most of my friends in design have been laid off or furloughed,” she said. “I know very few who are working or have been brought back.”
Ms. Jacobs, who lives in New York City, has taken the time to update her LinkedIn profile, along with her portfolio and résumé. She applied for unemployment benefits in late April but hasn’t been able to get through after her file was marked “pending” on the New York State Department of Labor website.
“There really isn’t anything out there right now,” she said. “Most businesses are either just beginning to reopen or reopening with a reduced staff.”
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