There’s no way around it: Thursday’s U.S. labor reports will be a mess.
While the June jobs data and weekly unemployment claims are expected to show further improvement in a hammered market, the actual trend may not be immediately clear when the Labor Department issues the reports at 8:30 a.m. in Washington. What’s more, the numbers could again be the subject of confusion and debate in the hours and days that follow.
That’s because some of the figures have been beset by data-quality issues, particularly the misclassification of out-of-work Americans as employed. The problem has caused the official unemployment rate to understate the degree of joblessness in America during the pandemic, and a fix would make comparisons between May and June difficult -- an especially sticky situation if the rate rises solely because unemployed people are finally classified correctly.
Understanding the numbers is more than just an exercise for economists, who blew it last time with projections of 7.5 million job losses in May, before the government reported a gain of 2.5 million.
The potential end of applications for small-business aid risks spurring a new wave of layoffs in the coming months, and the extra $600 a week in federal unemployment benefits is set to end in late July. President Donald Trump’s reelection bid increasingly hinges on the economy -- his main advantage over Democratic challenger Joe Biden in polls.
Meanwhile, the nascent recovery -- from a recession that began in February -- is under a growing threat from a surging coronavirus that’s causing cities and states to pause reopenings of restaurants and other businesses.
“We’ve got big forces at work here,” said James Sweeney, chief economist at Credit Suisse Group AG. In addition to the return of workers and the misclassification, “more recently you have the new wave of infections slowing the return. So this is tricky.”
The monthly report -- released a day earlier than usual because of the Independence Day holiday -- is forecast to show employers added 3.06 million workers to payrolls in June, a second month of record gains, while the jobless rate is expected to drop to 12.5% from 13.3%. That’s still well above the half-century low of 3.5% from February.
Similarly, the number of Americans applying for unemployment benefits in state programs likely fell for a 13th straight week, to 1.35 million, economists estimated. Even so, that’s six times as high as before the pandemic.
A report Wednesday from the ADP Research Institute showed U.S. companies added 2.37 million workers in June, suggesting that rehiring continued but at a slightly slower pace.