Job numbers are a good sign; not a victory flag

Although the better-than-expected US employment numbers that came out last week give reason for optimism, it is far too early to declare victory over the threat of further economic damage. Yes, the jobs report and other data released last week illustrated the kind of impressive across-the-board recovery that the economy is capable of. But the durability of this much-needed recovery — and, with that, the sustainable recovery of the global economy — is unlikely to be firmly established without a few more iterations in the historically tricky process of learning how best to live with Covid-19.
The surprisingly strong jobs report for June followed what many others felt had been the biggest data surprise ever witnessed by economists and Wall Street analysts — the previous month’s report. The 4.8 million net new jobs in June were almost twice the 2.5 million in May. It’s a record-setting outcome that came well ahead of the median consensus estimate of 3.1 million, itself subject to a wide variation of individual forecasts, falling essentially in a range of 900,000 to 5 million.
The nearly 2 percentage point drop in the unemployment rate to 11.1 percent was noticeably better than the expected 12.5 percent. And with the Bureau of Labor Statistics indicating that the possible extent of misclassifications had been reduced to 1 percentage point, it pointed to an impressive 7 percentage point drop from the implied April high of some 10 percent.
Signs of a strong labour market recovery went well beyond these widely cited headline numbers. Both labour force participation and the employment-to-population rates showed healthy increases, rising to 61.5% and 54.6% respectively. Moreover, every segment of the population experienced a decline in unemployment, including the one that missed
out May’s improvement, Black workers.
Two other important data releases last week also pointed to a strong bounce in economic activity. The ISM index of factory activity for June rose by a stunning 9 percentage points to 52.6, beating the consensus estimate of 49.8, powered in part by the critical orders component. This jump in a widely followed supply-side indicator was accompanied by an equally notably rise in an important demand-side indicator: the surge to 98.1 in the consumer confidence index, up from last month’s revised 85.9 and beating an expected 91.5.
Such data warrant optimism about the resilience and agility of the US economy in the face of the economic devastation wrought by the Covid-19 shock, let alone the pain and suffering associated with its debilitating and often-too-deadly health effects. They also come as a relief to more open economies around the world, including China and Europe, whose own data pointed to domestic
economic improvement.

—Bloomberg