Job trouble? Wave of rehiring after economy reopened to fade in July after viral spiral

The engine of the U.S. economy may have gotten clogged again — no thanks to the recent acceleration in coronavirus cases. That’s bad news for Americans hoping to return to their old jobs.

Just how much damage has been done will become more evident this week, especially from the U.S. employment report for July due next Friday. The number of jobs regained last month is unlikely to match the huge increases in May and June that totaled a combined 7.5 million.

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economists predict the U.S. added about 1.5 million jobs in July.

Even that estimate may be inflated though by seasonal changes in educational employment at the state and local level, Morgan Stanley contends. Private-sector jobs could increase by less than one million, the investment bank calculated.

See: MarketWatch Economic Calendar

Whatever the case, a much smaller increase in hiring or rehiring in July would bode ill for the U.S. recovery from the coronavirus pandemic. The government last week reported that gross domestic product sank a whopping 32.9% in the second quarter on an annualized basis, the biggest decline since World War Two.

Read: Economy suffers titanic 32.9% plunge in 2nd quarter, points to drawn-out recovery

Also:‘A massive welfare economy’ – federal aid prevents even steeper GDP collapse

“The big question hovering over next week’s employment report is whether the two-month surge in job gains stopped in July,” says David Donabedian, chief investment officer of CIBC Private Wealth Management. He thinks that’s exactly what happened.

It will be hard for the economy to make up a lot of lost ground in the third quarter unless hiring snaps back even faster.

See:MarketWatch Coronavirus Recovery Tracker

The U.S. lost a record 22 million jobs in March and April, according to Labor Department data. So far the economy has recovered less than one-third of those jobs.

The weekly tally of jobless claims, meanwhile, showed an even higher 30 million unemployed people were collecting benefits as of mid-July, representing about one in five Americans who said they were working before the pandemic, according to a Labor Department survey of households.

Robert Frick, corporate economist at Navy Federal Credit Union, said many people who expect to return to work are going to find they have no jobs or businesses to which they can return, a “grim reminder” of how much long-term damage the pandemic has caused.

“In the long run we are going to see a sobering slowdown in job growth,” he said.

The still-high level of unemployment, the viral spiral, and the uncertainty over whether Washington will provide more financial aid has understandably made Americans feel less confidence. On Friday Congressional lawmakers were still at odds on the next relief package with many benefits set to expire at the end of July.

A variety of measures that monitor consumer attitudes show a clear deterioration in July that’s likely to bleed over into August. That will make a recovery even harder.

Read:Consumer confidence wanes in July and points to rockier economic recovery

And:Consumer sentiment falls as coronavirus cases rise and federal aid set to expire

The news might not all be negative next week, however.

Manufacturers — auto makers in particular — have shown more resilience than the service side of the economy. The closely followed ISM manufacturing survey could show improvement for the third straight month.

The housing industry has also snapped back faster than expected amid a surge in home sales. Prospective buyers with secure jobs are taking advantage of record-low interest rates to buy new homes, a trend that may have been fueled by people fleeing the closed spaces of cities with a high number of coronavirus cases.

Even that potential bit of good news, however, has been overshadowed by the broader damage to the economy from the latest spike in coronavirus cases in many American states.

A full recovery can’t take root and blossom, economists say, until the disease is brought under control.

See: Pandemic will continue for some time, experts tell Congress as U.S. case tally nears 4.5 million

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Some Americans who got laid off are going back to work — here’s which sectors are rehiring

2.7 million Americans who were temporarily laid off amid the coronavirus pandemic were rehired last month, according to the Bureau of Labor Statistics jobs report. But economists aren’t overly optimistic that employers will continue to rehire at that pace.

The biggest gains in May were in leisure and hospitality, where 1.2 million Americans were rehired. Construction, education and health services and retail followed with 464,000, 424,000 and 368,000 job gains, respectively.

Also see:‘The biggest payroll surprise in history’ — economists react to May jobs report

The jobs in hospitality and retail were “the ‘easiest’ jobs to bring back,” which explains why they are returning first, said Andrew Hunter, senior U.S. economist at Capital Economics.

Layoffs in these two sectors that occurred over the past few months were a direct result of lockdown measures, he said. “So it’s no real surprise that many of those lost jobs have come back quickly as the economy has started to reopen.”

At the same time, hotels and stores selling non-essential items are for the most part still bound to strict capacity guidelines to avoid overcrowding. “Most are being forced to operate at half staff,” said Chris Low, chief economist for FHN Financial. “My sense is that they won’t be adding back more jobs in those sectors.”

Hiring within the construction sector has the potential to continue to grow as the U.S. economy begins to recover, and “fewer projects are likely to be postponed or canceled,” said Anirban Basu, chief economist at the Associated Builders and Contractors, a D.C.-based trade organization representing 21,000 industry members.

However, “it may take years for the commercial construction segment to return to pre-crisis employment levels,” Basu said. “Demand for new construction will be meaningfully dampened by the empty storefronts and office suites left in the pandemic’s initial wake. Residential construction will fare better. “

The Paycheck Protection Program, which enables small businesses to receive a loan that can transform into a grant if they are able to restore full-time employment and salary levels by June 30, also explains why more Americans were rehired last month, Hunter said. But that also means that last month’s employment boost was temporary.

Nevertheless, “PPP likely saved a couple of million jobs at least,” Low said.

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Japan’s MUFG, Mizuho in London rehiring spree despite Brexit By Reuters

By Lawrence White and Sinead Cruise

LONDON (Reuters) – Japan’s MUFG (T:) and Mizuho (T:) have hired a total of nearly 100 staff in London in the last 6 months, bolstering their trading and investment banking teams despite industry concerns over Brexit’s impact on financial services in Britain.

Mizuho has hired more than 25 senior bankers and traders, while MUFG has hired seven senior investment bankers, an aviation finance team from Germany’s DVB Bank and dozens of back office risk and compliance staff, information from sources and internal bank memos seen by Reuters show.

Wall Street and European rivals are moving staff from London to other European hubs, concerned about being able to keep serving clients with Britain outside the European Union.

The latest EY Financial Services Brexit Tracker showed 43 financial firms have announced plans to make local hires for more than 2,400 roles in the EU. The total number of jobs seen likely to relocate from London to the EU is around 7,000.

Financial lobby group TheCityUK said the financial services industry employs 1.1 million across Britain, mainly outside London.

The Japanese banks had cut back too far and are taking advantage of a relative lack of competition, headhunters said.

“They have been recruiting for the last four or five months, and towards the back end of last year, they have really come back out in force,” Ben Harris, senior manager at recruitment firm Morgan McKinley, said.

“They have taken in some heavyweight individuals away from other big banks who have been very cautious about adding headcount,” Harris added.

Mizuho has focused on fixed income products, where new head of global markets Asif Godall has hired bond and derivatives traders from rivals including Barclays (L:), Deutsche Bank (DE:), and HSBC (L:).

“We’ve been opportunistic in hiring, and have benefited from the fact the European banks have retrenched,” Godall said.

The strategy is to grow the bank’s ability to cross-sell financial products to its corporate clients, and make better use of its vast balance sheet as European lenders retreat, he said.


Morgan McKinley’s Harris said Japanese banks historically tended to make deep cyclical cuts to their workforces and sometimes shed too much in leaner times, leading to quickfire hiring sprees when market conditions improved.

MUFG offered redundancy to 500 senior London bankers in May, but is now building back up under new chief for the region John Winter, with a similar focus on cross-selling.

“The past twelve months have been about bringing in some strategic hires to support these plans, as well as making some key internal appointments to ensure that we bring greater co-ordination and focus to our business,” Winter said.

Neither MUFG or Mizuho feature prominently in global investment banking league tables, sitting outside the top 10 positions for fees, equities, initial public offerings, global debt and mergers and acquisitions, data from Refinitiv shows.

Mizuho is however ranked number three in global syndicated loans, while MUFG holds eighth position.

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