US: Outsized gains in payrolls likely won’t be repeated in the next few months – Wells Fargo

The US official employment report for June showed better-than-expected numbers, with a gain in jobs of 4.8 million. Analysts at Wells Fargo point out that those gains likely won’t be repeated in the next few months due to the recent re-acceleration in coronavirus cases.

Key Quotes: 

“Over the past two months, payrolls have rebounded 7.5 million, as businesses that were shuttered due to the pandemic re-opened and began to call back furloughed workers. That said, the labor market still has a long way to go to recoup the 22 million jobs that were lost in March and April.”

“Employment gains were broad-based. Increases were concentrated in industries that had borne the brunt of the layoffs. Specifically, payrolls rose nearly 2.1 million in June in the leisure & hospitality sector (i.e., restaurants, hotels, etc.) and 740K in the retail sector.”

“The unemployment rate fell by more than most analysts had expected, dipping to 11.1% in June from 13.3% in May (...) the labor market still has a long way to go as nearly 18 million individuals are currently classified as unemployed.”

“With the number of COVID-19 cases accelerating and some states delaying re-opening or imposing new restrictions, we are concerned that a significant number of individuals may become furloughed again. The outsized gains in payrolls that were registered in May and June likely won’t be repeated in the next few months.”