“It’s the economy, stupid.”
That’s the now-infamous phrase coined by Democratic strategist James Carville in the early 1990s.
At the time, Carville was a strategist in President Bill Clinton’s successful 1992 presidential campaign against incumbent George H. W. Bush.
Nearly 30 years later, that same phrase still applies and could be what helps President Donald Trump secure a second term in office.
Despite the coronavirus pandemic bringing the U.S. economy to a grinding halt the past few months, the new June jobs report is nothing short of spectacular for Trump and potentially bad news for Democrats.
The U.S. economy added 4.8 million jobs in June and the unemployment rate fell to 11.1 percent, both better than expected.
The increase in the ranks of employed workers shows that companies ramped up hiring as the economy reopened and consumers came back to stores, restaurants, and other businesses that had been shuttered in March and April.
Despite the increase in the number of employed workers, there are still tens of millions fewer Americans working today than February, the month before the pandemic hit the U.S. economy. And a separate report on Friday showed that over 1.427 million Americans were laid off last week, the fifteenth week in a row of one million-plus new claims for unemployment benefits but the thirteenth week in a row of declining claims.
The previous week’s level of jobless claims was revised up by 2,000 from 1,480,000 to 1,482,000.
Economists had been expecting around 3 million new jobs, although the range of estimates was unusually wide due to the unprecedented nature of the shutdown and reopening. Estimates ranged from 1.9 million jobs to more than 9 million. The unemployment rate was expected to fall to 12.4 percent from 13.3 percent.
A report on private payrolls from ADP and Moody’s Analytics on Wednesday estimated that businesses increased their workforces by 2.37 million in June. The estimate for May, which initially showed a loss of 2.76 million jobs, was revised to show a gain of 3 million.
The government’s nonfarm payroll data, which covers both private and public sector workers, showed the economy gaining 2.5 million jobs in May, far more than expected and indicating an accelerated pace of the recovery.
The labor force participation rate increased by 0.7 percentage points in June to 61.5 percent, but is 1.9 percentage points below its February level. Total employment, as measured by the household survey, rose by 4.9 million to 142.2 million in June. The employment-population ratio, at 54.6 percent, rose by 1.8 percentage points over the month but is 6.5 percentage points lower than in February.
Average hourly wages are up 5 percent compared with a year ago, although they fell 1.3 percent compared with May. Average wages often rise at times of mass layoffs when lower-paid employees are more likely to lose their jobs. The average workweek slipped from 34.7 hours to 34.5 hours.
The Trump administration’s aid programs appear to be working. Direct relief payments to taxpayers and enhanced unemployment have kept incomes up despite the huge rise in unemployment, which in turn has boosted demand for consumer products. The Paycheck Protection Progam, which provides forgivable loans to small businesses that avoid layoffs, also seems to have supported employment and rehiring.
The monthly figures are constructed from data collected mid-month, in this case the week ended June 12. As a result, they may not reflect any slowdown that may have been caused by a renewed surge of coronavirus infections and backtracking on reopenings in some states later in the month.
With confirmed coronavirus cases spiking across the Sun Belt, a range of evidence suggests that a nascent recovery is stalling. In states that are suffering the sharpest spikes in reported virus cases — Texas, Florida, Arizona, and others — progress has reversed, with businesses closing again and workers losing jobs, in some cases for a second time.
On Wednesday, California re-closed down bars, theaters, and indoor restaurant dining across most of the state. And Arizona’s outbreak grew more severe by nearly every measure. Florida has closed some beaches.
There is mixed evidence about the pace of the recovery in the second half of June. Jobless claims remained stuck at the elevated level of around 1.5 million, suggesting that economic growth may have stalled. But survey data from manufacturers and indicators of consumer spirits point to ongoing economic progress.
Credit and debit card data tracked by JPMorgan Chase show that consumers have slowed their spending in just the past week, after spending had risen steadily in late April and May. The reversal has occurred both in states that have seen surges in reported COVID cases and in less affected states, said Jesse Edgerton, an economist at J.P. Morgan.
Nationwide, card spending fell nearly 13% last week compared with a year ago. That was worse than the previous week, when year-over-year card spending had declined just under 10%.
Real-time data from Homebase, a provider of time-tracking software for small businesses, shows that the number of hours worked at its client companies has leveled off after having risen sharply in May and early June. Business re-openings have also flattened. The economic bounce produced by the initial lifting of shutdown orders may have run its course.
Mobility data based on Apple maps routing requests shows ongoing growth in driving and walking, although mass transit appears to remain depressed. Data on reservations and walk-ins from Open Table showed an increase immediately following reopenings around the country but little progress in recent weeks, likely a reflection of the fact that many restaurants are operating at just fractional capacity. Indeed, at around 60 percent below last year’s levels, this could be an indication of restaurants operating near maximum capacity.
TSA data shows airline passenger numbers have continued to climb throughout June, nearly doubling in the month.
Home sales have proved strong, with pending home sales in May jumping much higher than expected and lumber demand climbing.