After two months of record-setting job growth, the Labor Department reported Friday that the U.S. added 1.75 million jobs in July. That's down from 4.5 million jobs in June, and 2.5 million in May.
The slowdown puts a damper on what many hoped would be an immediate and robust recovery from the economic downturn that swept across the country with the first wave of the coronavirus.
The drop also aligns with two economic studies released this week that show another round of layoffs is already underway as evidence emerges that many workers are losing their jobs for the second time since shutdown measures took hold in March.
"We might not see the effect in the BLS data this month, but we certainly will next month," Dan Alpert, an adjunct professor and senior fellow in financial macroeconomics at Cornell Law School, told Cheddar. "I won't be surprised if in the month of August we see an actual decline in the number of jobs, not a recovery."
Alpert is behind a new real-time survey that was done in collaboration with RIWI, a global analytics firm, and the U.S. Private Sector Job Quality Index, which tracks the health of the job market by looking at measures such as wages and hours.
Using a methodology that randomly engages the entire web-using population of the U.S., the survey found that 31 percent of workers who were placed back on payrolls after getting laid off or furloughed have since been laid off again, and that 26 percent say their employers have told them a second layoff is possible.
The California Policy Lab, a research group based out of the University of California, discovered a similar phenomenon by looking at unemployment claims.
In a study looking at the week ending July 25, the group found that 57 percent of unemployment claims were from Californians who were reopening a prior claim after a period of temporary work. This compares to the beginning of the crisis, when just 5 percent were repeat claims.
"We saw a substantial increase in UI claims in July, and it was entirely driven by these workers who have had multiple layoffs," said Till von Wachter, professor of economics at the University of California Los Angeles and faculty director of the California Policy Lab. "Those multiple layoffs are particularly concentrated in accommodation and food and retail sales."
Wachter attributed the increase in what he calls "additional claims" to the latest coronavirus surge, but he also saw this as fitting into a longer-term trend that economists predicted from the beginning of the crisis, in which hard-hit businesses steadily drop off.
"Something that many economists have been waiting for is a wave of company closings once the economy restarts," he said. "Some businesses that may not have been doing well shut down immediately in March and April. Others were hanging on, thinking that maybe business will be good enough when they reopen. Then they reopen and find out after a few weeks that things have not progressed to where they would need them to be."
In other words, turning on the open sign and rehiring your staff doesn't mean customers are spending enough money to make a business viable, especially given widespread capacity limits.
While the rise in coronavirus cases in states such as California may seem like the obvious culprit for a wave of job losses, Alpert said non-surge states actually had a higher rate of repeat layoffs.
"We went and did a very close look at whether or not this was being driven by the COVID surges in the 32 or so states that are on the New York State no-go list," Alpert said. "We found that the numbers were higher for repeat layoffs for the healthy states, not the surge states, which indicates that this is systemic."
In his view, the real source of layoffs is that the Paycheck Protection Program, which distributed loans to 4.8 million borrowers with an aggregate 51 million employees, is drying up.
In order for the loans to be forgivable, companies initially needed to use much of the money on payroll, but that only covered labor expenses for a set eight-week period. (Congress later passed an extension, which expires Saturday.) Alpert said this temporarily juiced the employment numbers in May and June, but it does not prove that the businesses themselves are actually viable.
"We had the May and June Employment Situation Reports, which showed these massive increases in jobs that weren't actually massive increases in jobs," he said. "22 percent of the people who were rehired told us that they didn't even go to work. They were just being paid."
Another PPP extension is part of the ongoing Phase 4 stimulus negotiations currently being held between Democrats and Republicans on Capitol Hill.
Meanwhile, the 32 percent who are back at work, according to the survey, could still be benefiting from the PPP based on the timeline for the first round of loans and the deadline for using them on payroll. That's why some economists predict that next month's jobs report will paint a much bleaker picture of the economy.
Alpert said he was initially suspicious of the May-June increases when he saw significant job growth in sectors that were still clearly unopened.
"There were 450,000 new jobs in dentist offices," he said. "I mean, they were closed. Who wanted to put their hands in peoples' mouth during the COVID crisis?"
He argued that PPP should have provided more support for a longer period of time if the country wanted to avoid this drop-off.
For those who have already gotten the ax — for either the first or second time since coronavirus hit the U.S. — there is growing evidence that job hunting for many is getting more difficult.
"We do see that people are searching very intensely, that they are submitting lots of applications," said Julia Pollak, labor economist for ZipRecruiter. "Many people display some degree of desperation in their job search."
Pollack also noted an uptick in job seekers looking for work outside of their preferred occupation and location, as well as pursuing more jobs for which they are overqualified.
Usually about a quarter of job postings on ZipRecruiter are temporary opportunities, she added. As of the last week of July, temporary positions were over 35 percent of positions.
"So it does seem like many people who have lost their jobs are only able to find temporary positions and are then going onto unemployment insurance," she said.
Looking at these indicators, Alpert said, is crucial to understanding how long and how rough this recovery is likely to be.
"All of this comes down to what will be the severity of this crisis and what will be its duration," he said. "The severity is going to be significantly greater and the duration significantly longer if we don't have a policy that addresses this issue."