Hiring in the US slowed sharply in July as the country struggled to control the coronavirus pandemic.
Employers added 1.8 million jobs last month, down from a record 4.8 million in June.
The unemployment rate fell to 10.2%, continuing to improve from the high of 14.7% seen in April.
The figures reignited calls for Washington to approve further economic stimulus, though the slowdown was not as bad as many economists had feared.
The US Labor Department report, “confirms that the resurgence in new virus cases caused the economic recovery to slow, but also underlines that it has not yet gone into reverse,” said Andrew Hunter, senior US economist at Capital Economics.
The job gains in July came from many of the sectors hit hardest by shutdowns, including restaurants, bars and retail outlets.
Economists have said this kind of hiring, happening as states around the country allow establishments to reopen, represents the “easy” part of a long recovery ahead.
Worse than financial crisis
Since February, the US has lost more than 12 million jobs and seen unemployment spike from a roughly 50-year-low of 3.5%.
In the three months to the end of June, the country’s economy was hit by its sharpest quarterly contraction in more than 70 years of record-keeping, shrinking at an annual rate of 33% or nearly 10% year-on-year.
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The 10.2% unemployment rate the US Labor Department reported for July is higher than the worst of the 2007-2009 financial crisis, when the jobless rate peaked at 10%.
This week, nearly 1.2 million people filed new claims for unemployment. More than 31 million people – roughly 1 in 5 American workers – continue to collect the benefits.
Heidi Shierholz, economist at the left-leaning Economic Policy Institute, said: “We added 1.8 million jobs in July, but our jobs level remains in absolute crisis”.
Economists have said the loss of momentum last month is a sign of the peril facing the economy, as health concerns put a dampener on consumer spending and temporary measures passed in March, including bans on evictions and a $600 emergency boost to unemployment benefits, expire.
“In the absence of additional fiscal aid, the broad economy risks losing momentum as it shifts into the second phase of its rehabilitation,” said Gregory Daco, economist at Oxford Economics. “Additionally, more temporary layoffs are becoming permanent, increasing the scarring effects of the coronavirus recession that could prolong the recovery substantially.”
While Washington lawmakers have been trying to negotiate further stimulus, many Republicans oppose a deal of the size Democrats say is necessary.
“The most responsible thing we can do is to take proactive measures to allow people to return to work safely, instead of continuing to lock down the economy,” Republican Congressman Kevin Brady said after the report.
Republicans want a deal to include legal protections for employers against virus-related health claims from workers.
They are also pushing to reduce the $600 emergency supplement to unemployment benefits, which expired last month, and have proposed far less aid to local governments than Democrats want.
Their stance has presented a challenge for US President Donald Trump, who had hoped to use a strong economy as his calling card to voters in his campaign for re-election in November. He has said he may act unilaterally to extend some aid.