The latest employment report showed the US added 1.76M jobs in the month of July, well above the 1.5M estimate. Of the workers rehired this month, 80% were from the service industry with leisure & hospitality leading the way. The job recovery slowed markedly from last month’s 4.8M rate as states instituted stricter social distancing guidelines. Virus infection rates now appear to be trending down nationally and August’s report will be a good indicator of the health of the recovery in jobs. All told, employers have hired back 9.25M workers of the 21.5M lost jobs since the pandemic began in March. This brings the current unemployment rate to 10.2%
Second-quarter GDP came in at an all-time low of -32.9% annualized, or -9.5% on a quarterly basis. Economic weakness was broad-based with the services industry bearing the brunt of the downturn. We have a lot of ground to make up, but recent economic releases provide evidence that we are starting to dig our way out of this economic morass:
- July ISM Manufacturing 54.2% and Services 58.1% are both in growth territory and indicate a broad-based recovery.
- Consumer spending remains strong led by expenditures on big-ticket items, including autos, RV’s and boats.
- Government stimulus checks have supported incomes, much of which has been saved by consumers. This should provide “dry powder” to prop up economic activity.
- Low mortgage rates spurred new home sales to new record highs in June. Existing home sales also reported growth of 20.7% as closings were pushed back due to virus constraints.
- Trade grew, albeit off a low base, at 6.9% in June as manufacturing ramped back up across the world.
- The Fed’s GDPNow model estimates third-quarter GDP growth of 20.5% on an annualized basis.
Bottom Line: The US economy shows progress toward a return to growth in the latest economic releases. A continuing recovery will depend largely on the virus’s path and renewed stimulus from Congress to bridge the gap for the unemployed.