Increase in infections poses a risk for employment recovery

Increase in infections poses a risk for employment recovery

Vakıf Katılım

Following the report pointing to 4.8 million employment increase in the USA in June, an increase of 1.6 million people is expected in the July non-farm payrolls report to be announced tomorrow. In contrast, current signals on the employment market tend down the risks to forecasts and the next rate of employment recovery. While the ADP data, which normally does not have a strong relationship with NFP, shows that the private sector added only 167 thousand new jobs in July, also the high course of the regular weekly jobless claims data continues.

 

We see that the increase in the number of cases in the USA creates new uncertainties and may affect the pace of economic recovery. This is also true in terms of employment market dynamics, as the recruitment decisions of firms will tend to slow down during this process, as new lockdowns may occur. While the process of opening up the economy and the resumption of firms brought back some of the 21 million jobs lost in April alone, with a total of 40 million jobs, that portion of return is a small slice. A significant part of the workforce before the pandemic continues to be idle. If the pandemic wave grows with new infections, it is likely that the segment that comes back to work will be again included in this idle group.

 

The disaggregation of new unemployment benefits has an important effect on the fact that the economic support package prepared by the Trump administration is still not accepted and the negotiations are extended. The main reason for the Trump administration to cut unemployment benefits was that 600 USD of aid was higher than most people's salaries, and so those who received help might not want to return to work. As Trump encourages returning to full-time work and resists the economic downturn, the recent rise in infection rates has pushed firm executives to be more cautious, and the employment market recovery is losing momentum. In the USA, the number of daily cases is still around 50 thousand and deaths are over 1300. Sustainability risk remains valid in terms of economic activity and employment dynamics.

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