Has the Employment Recovery Stalled?

Data from the Understanding Coronavirus in America tracking poll shows almost no gain in employment in July.

After unprecedented job losses in April, the American labor market posted strong employment gains in May and June, according to the Employment Situation Summary or “jobs report” from the Bureau of Labor Statistics (BLS). Key indicators in the report come from a household survey that the BLS fields monthly in the week containing the 12th of each month. For May and June, the report had shown increases in the number of Americans employed of 3.8 million (later corrected to 4.1 million) and 5.3 million, respectively. Though these numbers represent only a fraction of the 23 million jobs lost in April, the reports were good news and showed that, as of June 12, employment was recovering at a steady pace.

After the last report was published on July 2, the good news has been balanced by the concern that the remaining job losses were going to be harder to recover. This fear was compounded by the deepening of the pandemic. Around the week of June 12, the number of new infections was at its lowest point since late March, with the new confirmed cases hovering in the low twenty thousand per day. This number has risen rapidly, passing the forty thousand mark in late June and the sixty thousand mark in early July.

We do not yet know what effect this will have on employment. We will not see the July figures from BLS until August 7. However, using survey data from the Understanding America Study we can get a snapshot of how the labor market was doing around the week of July 12, and hence predict what the next BLS report will say.

The Understanding Coronavirus in America (UCA) is a tracking panel that surveys a representative sample of Americans roughly every two weeks. The survey was launched on March 10, and includes a national bi-weekly questionnaire on employment, health behavior, and other topics. It is nested in the Understanding America Study, a sample of about nine thousand people, which is nationally representative. An important feature of the Understanding America Study compared to many other sources is that it is sampled from physical addresses, and provides internet access to households that don’t have it. By comparison, many other surveys are “opt-in,” and while they calculate weights to match population on some demographic characteristics, they recruit only people who self-select online, and hence they miss important swathes of the population. Within the UAS, a subset of more than 7,000 individuals are part of the UCA tracking panel.

Using data from the UCA, we have matched the direction, and to some extent the magnitude, of the changes in employment in the BLS’ household survey.

According to our UCA data, growth in the proportion of employed Americans was 1.4 percentage points in May, almost exactly matching the 1.5 percentage points original estimate from the BLS (later revised to 1.6 percentage points). Last month, we published a blog post where we predicted the June report would show an additional growth of 1.6 percentage points, which turned out to be below the 2.0 percentage points figure reported by the BLS.

Following the same strategy employed in that post, we predict that job growth has stalled. Using our most recent survey, which encompasses the week of July 12, the employment rate is estimated to be less than 0.1 percentage points higher than a month earlier.

While there is a margin of error with a sample of the size of the UCA, it seems that job growth has at least slowed down, if not entirely stalled. As Congress discusses next steps for economic stimulus and whether to extend unemployment benefits, it is important to keep in mind that the job market has likely stalled and millions face the prospect of not going back to work in months to come.