Jobs Recovery Stalls in States Experiencing COVID-19 Surge: Report

People walk past empty stores and restaurants closed amid the CCP virus in Beverly Hills, Calif., on May 8, 2020. Mark Ralston/AFP via Getty Images

Small-business hiring has slowed in states experiencing a COVID-19 resurgence, according to high-frequency labor market data from a recent report by scheduling firm Homebase.

The report found that after more than two months of steady labor market recovery across all states following a sharp plunge in April amid lockdowns, some states are showing a split. Those that reopened earlier than the rest of the country saw the trend in business activity, as expressed by hours worked, reverse course and start to fall again several weeks ago, roughly coinciding with a rise in COVID-19 infections.

“States like Arizona, Florida, and Texas have seen the number of hours worked decline since cases began to spike at the end of June,” wrote Ray Sandza, VP of Data and Analytics at the company.

The “hours worked” trend line for Arizona, Florida, and Texas experienced a significantly smaller drop relative to Massachusetts, New Jersey, and New York, where the initial phase of the outbreak was more severe and the restrictions more pronounced. After cresting in mid-June, the measure of hours worked in Arizona, Florida, and Texas was around 17 percent higher than in Massachusetts, New Jersey, and New York, while now that difference appears to be around 2–3 percent.

“States hit hardest at the beginning of the pandemic, including Massachusetts, New Jersey, and New York, have steadily improved and, despite a deeper trough, are almost even with states that re-opened earlier and are now experiencing a second wave of cases,” Sandza wrote.

The report also shows that, after spiking in the immediate aftermath of the crisis in April, the number of hourly workers applying for jobs has fallen to pre-pandemic levels.

“Application rates remained elevated in the months following the beginning of COVID-19, despite safety concerns among hourly workers,” Sandza noted in the report. “However, application rates have fallen over last month, perhaps as workers become discouraged by the lack of jobs and fear increases in coronavirus cases.”

To date, there have been more than 3.9 million confirmed cases of COVID-19 in the United Status and more than 142,000 deaths, according to a Johns Hopkins University tally.

The report is based on data from more than 60,000 businesses and around a million active hourly employees. Researchers at the Federal Reserve have used Homebase high-frequency data to complement their labor market analyses.

The data comes ahead of the July 23 weekly jobless claims figures from the Labor Department, with last week’s numbers (pdf) showing elevated levels of unemployment claims, heightening concerns about the economic toll from a spike in COVID-19 cases. The data showed there were more than 32 million Americans on unemployment benefits for the week ending June 27. By comparison, there were just over 1.6 million people claiming benefits in the comparable week in 2019.

“The economic data shows there is still a challenge going forward,” said William Delwiche, an investment strategist at Baird in Milwaukee, commenting on last week’s jobless claims figures. “Congress better get its act together and pass another fiscal stimulus.”

Also feeding into concern about a slowing recovery is July 17’s University of Michigan consumer sentiment index, which dropped to a reading of 73.2 in mid-July “due to the widespread resurgence of the coronavirus” from 78.1 in June, the university stated. It warned that further declines were likely in the months ahead.

“Sentiment will likely remain subdued in the absence of a more substantial health response that will result in better virus containment and prevent repeated closures that will cause more permanent damage to the labor market,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.