August 7, 2020

July Unemployment Data Show Another Slight Improvement – But Rate Remains Historically High

New data from the Bureau of Labor Statistics (BLS) show that labor market conditions improved somewhat in July. After the unemployment rate shot up from 4.4 percent in March to 14.7 percent in April, it has subsequently dropped to 10.2 percent in July.

The decline in the unemployment rate from June to July results from a decrease in the number of unemployed individuals from 17.8 million to 16.3 million, while the size of the labor force remained at about 160 million. While this month’s data show another welcome move in the right direction, our unemployment rate remains historically high.

In addition, it is important to keep in mind that the data from this month’s report are based on two surveys that were conducted in the middle of July. Since then, many parts of the country have witnessed increased outbreaks of the coronavirus and some economic support (such as the Paycheck Protection Program) has now expired, which may lead to an increase in unemployment relative to the numbers reported today.

The unemployment rate for July continued its decline from the record level that was set in April

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Job gains in July were highest in the leisure and hospitality industry sector. The number of such workers increased from 11.9 million in the June report to 12.5 million in July, with the majority of those gains coming from jobs at “food services and drinking places.” Four other industry sectors together accounted for another 1 million job gains:

  • Government
  • Trade, transportation, and utilities
  • Education and health services
  • Professional and business services

Other industry sectors contributed about 200,000 new jobs.

Job gains in July were driven by the leisure and hospitality sector

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Despite the improvement in the reported rate of unemployment, a large number of workers continue to file for unemployment compensation. In the week that ended on August 1, there were 1.2 million new claims (such data are released on a weekly basis). However, claims are down considerably from late March and early April, when unemployment claims were near 7 million for two consecutive weeks.

Claims for regular unemployment insurance remain high

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Some individuals continue to report being only temporarily unemployed. Those individuals are experiencing the same economic pain as others who are unemployed, but they may be more likely to get their jobs back eventually. In February, before the COVID-19 outbreak was widely recognized, there were 801,000 workers on temporary layoff. That number skyrocketed to 18 million in April, before falling in July to 9 million — or 56 percent of those who were unemployed.

The labor market’s overall improvement in July does not change the fact that conditions are still very difficult for workers from all demographic groups. The unemployment rate in July was at least 5 percentage points higher than it was in March for each of the racial and ethnic categories that are presented by BLS. In addition, the gap between the unemployment rates of white and non-white workers has persisted during that period, as unemployment rates for minority workers have grown to very high levels.

Unemployment rates across racial and ethnic groups have increased significantly during the COVID-19 pandemic

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Standard unemployment rates do not fully account for the negative labor market effects of the coronavirus pandemic. After adding the workers who have stopped looking for work during the past four weeks, the overall unemployment rate increases from 10.2 percent to 11.3 percent. Adding the 8 million people that are working part time despite desiring full-time work brings the rate to 16.5 percent. In other words, one-sixth of American workers are currently affected by the ongoing downturn in the labor market, and not all of those individuals are captured by the headline unemployment rate of 10.2 percent.

The official unemployment rate does not include many workers that have been affected by the COVID-19 outbreak

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As the economy struggles and many people remain out of work, the federal budget will be affected in a number of ways. Income and payroll tax receipts will be at lower levels because fewer people are working. Also, payments for unemployment insurance and other safety net programs will remain relatively high, especially if lawmakers enact a continuation of certain additional unemployment benefits that expired on July 31. Legislation to provide relief to individuals and businesses from the pandemic will add at least $2 trillion to the debt. However, there is no reasonable alternative — providing assistance to individuals who lose their jobs, especially during a global health crisis, can save the economy from suffering even further damage.


Related: Here’s Everything Congress Has Done to Respond to the Coronavirus So Far


Image credit: Photo by John Sommers II/Getty Images

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