Dropping US unemployment could be reversed by surging Covid-19 cases

US unemployment rate in June dropped for the second straight month amid reopening efforts, indicating an improvement in the hard-hit labor market.

But with the recent uptick in Covid-19 cases, analysts said the road to recovery might not be a smooth one.

US employers added 4.8 million jobs in June, pushing the nation's unemployment rate down to 11.1 percent, the US Bureau of Labor Statistics (BLS) reported Thursday.

The unemployment rate previously soared to a record 14.7 percent in April, as Covid-19 ravaged the economy. It declined slightly to 13.3 percent, as businesses gradually reopened across the country.

"Nonfarm payrolls rose by more than expected in June while the unemployment rate fell considerably," Jay H Bryson, acting chief economist at Wells Fargo Securities, wrote in an analysis, while noting that the labor market "still has a long way to go" to recoup the 22 million jobs lost in March and April.

Also on Thursday, the Labor Department reported that 1.4 million Americans filed a first-time claim for unemployment insurance last week, the 13th weekly decline in a row but still a historic high.

That drop was offset by an increase in pandemic unemployment assistance (PUA) claims, which rose almost 840,000, according to Diane Swonk, chief economist at Grant Thornton, a major accounting firm.

Several US states, mostly in the South and West, have recently seen an uptick in Covid-19 cases as businesses continue to resume operations, casting a shadow over the current path to reopening.

That drop was offset by an increase in pandemic unemployment assistance (PUA) claims, which rose almost 840,000, according to Diane Swonk, chief economist at Grant Thornton, a major accounting firm.

"This is no time to pop champagne corks," Swonk wrote in a blog. "That is still nearly double the drop in jobs we experienced during the Great Recession."

Noting that the BLS survey was conducted during the week of June 12, she said "the hole is still deep while prospects for continued gains in July have faded with a resurgence in Covid-19 cases and hospitalizations."

Several US states, mostly in the South and West, have recently seen an uptick in Covid-19 cases as businesses continue to resume operations, casting a shadow over the current path to reopening.

Noting that the official data counted an extra 2.0 million people who were "not at work for other reasons" as employed, and that 4.6 million people had left the labor force since February, Peterson Institute for International Economics (PIIE) senior fellow and Harvard professor Jason Furman, and Harvard Kennedy School research associate Wilson Powell, wrote in an analysis that the "realistic unemployment rate" was 13.0 percent in June.

(Source: UNB)