The US Labor Department announced a non-farm payroll jump in June, with a monthly all-time-high of 4.8 million jobs created.
This surge was led by the reopening of factories and restaurants, and far surpasses both the 2.5 million joining the labour market in May, and the 3 million forecast for new jobs in June.
The Labor Department said that of the new jobs, over 2 million were in the hard-hit but high-staff-turnover hospitality sector. Other notable increases were 740,000 new employees in retail, 568,000 in healthcare and a 356,000 rebound in manufacturing employment.
The rally in new jobs was partially led by the government’s Payment Protection Program, which gives loans and partially waives some of the sums owed if the original loan has been put towards staff wages.
However, the jubilant reaction to today’s news involves a concerted effort to ignore the obvious grey clouds overhead. Funds for the PPP are running out, and in turn the job rally may lose some steam.
Similarly, all US optimism ignores the glaring fact that Coronavirus cases are rising at a worrying rate, with little to no contingency plans in place. Not only does this pose problems for consumer confidence and behaviour, but if it continues, could present challenges for US trade, travel and diplomacy – as seen with EU travel restrictions on US citizens.
In addition, as stated by Spreadex Financial Analyst Connor Campbell,
“The average hourly earnings showed a 1.2% contraction month-on-month, missing out on the forecast improvement. The weekly jobless claims reading showed another 1.427 million Americans filed for unemployment for the 7 days to June 27. And, crucially, those job additions across May and June barely account for a third of those lost in April.”
Oxford Economics described the fall in US employment (still estimated to be at 11%) and only a small reduction in new unemployment claimants (still at 1.43 million for the last week in June), as a “worryingly slow decline”.
Michael Pearce, Senior US Economist at Capital Economics, predicts that “the recovery from here will be a lot bumpier and job gains far slower on average”.
Fed Chief Jerome Powell added that while June’s progress was an important marker for the economy entering a new phase, any prolonged success would be contingent on the US’s ability to contain the spread of the virus.
With these bad omens in mind, US equities gains were comparatively muted versus their European counterparts. The Dow Jones was up 0.97% to 25,985 points while the S&P 500 rallied 1.01% to 3,148.
In the meantime, the FTSE finished at 6,241 points, up 1.34%. The CAC and DAX stole the show, though, 2.49% and 2.84% to 5,049 and 12,608 points respectively.