US & Canada Jobs Strong, But a Long Way to Go

US:

• The US economy added 1,763,000 jobs in July, about as expected.
• The unemployment rate fell from 11.1% to 10.2%, better than expectations of 10.6%.
• Job gains were widespread, however, the normal seasonal adjustments are out of synch with the new environment. 
• For example, this month there were 301k jobs government jobs created, the second-highest ever. Normal seasonal adjustments presume that teachers leave the workforce in June, but this year they left earlier causing an artificially large gain in July.
• The bigger story is that the economy lost a total of -22,160k jobs in March and April, and has only regained 9,279k jobs, or 41.9% since then.
• And of those 9,279 jobs regained, leisure and hospitality accounted for 3,978 of them or 43% of the total. Given the likelihood of a resurgence of COVID-19 in the fall, it seems unlikely that this will continue to be the case.
• Similarly, retail has accounted for 16% of all jobs regained, and those are likely at risk as well.
• But the even bigger picture is that of the 9,279k jobs regained, almost all of them, 95.2% were people returning from temporary layoffs.

• Combined with the fact that several surveys are showing large permanent job losses, one has to conclude that the pace of job gains will slow and that it will be 2022 to 2023 before we return to anything remotely resembling “full employment.”

• In the meantime, Congress has yet to hammer out an agreement for the next round of stimulus and the participants are still apparently far apart. However they are supposed to take their summer break on August 10, so this may be an extra incentive to make a deal.
• And they better, because without some sort of supplemental income, including unemployment benefits, people are going to start getting desperate. 
• Finally, note that under the CARES act, there was a moratorium on evictions, and that’s gone now. This morning the Aspen Institute issued a new study estimating how many evictions there could be under different assumptions, and it’s rather unsettling.

• The economy is not going to recover for a while. There will be more stimulus packages, and future tax-payers will be footing the bill.

Canada:

• The economy created 419k jobs in July, and total hours rose a strong 5.3% m/m.
• Gains were widespread across industries, and only New Brunswick saw a downturn, a very minor -1.8k.
• However much of the 419k total gain was in 345k part-time jobs.
• The unemployment rate fell from 12.3% to 10.9%
• The bigger picture is that the labor market has regained 1,661k jobs of the -3,005k lost, or 55.2%.
• That’s much better than the US’ 41.9%.
• As in the US, new benefits such as the Canada Emergency Response Benefit (CERB), which pays affected workers $2,000 every four weeks, ends in September. Many have already received their last payment. Looser constraints on Employment Insurance are reportedly under contemplation by the Liberal Party.