The US unemployment rate fell to 10.2 per cent in July but employers added fewer jobs than in June, as the economic rebound from the pandemic was hindered by a spike in Covid-19 cases in the American south and west.
The fall in the jobless rate from 11.1 per cent in June was slightly better than economists had expected. According to the US labour department, employers added 1.8m jobs in July, a much slower pace from 4.8m in June.
The labour department said the employment conditions “reflected the continued resumption of economic activity that had been curtailed due to the coronavirus pandemic and efforts to contain it”. The economy saw “notable job gains” in a range of industries, including leisure and hospitality, government, retail and a variety of services, including healthcare, it added.
One-third of the gains in new jobs came in the leisure and hospitality industry, as more people travelled compared to the height of the lockdowns in the pandemic’s early days. The retail sector added 258,000 jobs, with roughly half that coming in the clothing sector. The healthcare sector added 126,000 jobs, driven in part by increased employment at dental clinics.
The deceleration in the labour market recovery came as the White House and Democrats remained sharply divided over how much Congress should provide in a new aid package for millions of Americans who remain out of work.
The number of unemployed Americans fell 1.4m to 16.3m in July, the government said in its report. The jobless rate declined for many segments of the population, including Caucasians, Asian-Americans and Hispanics. But the percentage of African-Americans out of work showed little change at 14.6 per cent.
The data released on Friday underscored the continuing impact of the summer’s coronavirus outbreak, which has taken the US death toll to more than 150,000. Data published on Thursday showed that the number of Americans applying for jobless benefits last week remained stubbornly above 1m.
The stakes are high for Donald Trump, who had been banking on a strong economy and low unemployment to propel him to re-election. The president faces a tough battle against Joe Biden, the Democratic candidate, as he struggles respond to a crisis that has taken a severe toll on his standing in opinion polls and balance the need to protect public health without causing further economic damage.
The jobless situation has put Democrats and Republicans at odds as they hash out what would be the fifth rescue package since the pandemic began. Nancy Pelosi, the Democratic speaker of the House, on Thursday evening said both sides remained “far apart”.
Democrats argue that Mr Trump is abandoning Americans at a time of crisis, while the president accuses them of pushing Congress to rescue cities and states that are badly run by Democrats. Some Republicans say the jobless benefits are a disincentive for workers to return to their jobs.
Mr Trump has also accused Democrats of playing politics with the stimulus talks, because, he claims, they want to ensure that Americans remain in economic pain to help Mr Biden win the White House.
Democrats counter that the high unemployment underscores the need for more assistance — including the renewal of $600-a-week unemployment benefits that expired last week.
John Barrasso, a Wyoming senator who serves in the Republican leadership, said Republicans had different views on the details of the rescue package, but were unanimous in opposing the $3.4tn plan that Ms Pelosi and Chuck Schumer, the top Senate Democrat, have been pushing.
“There are things that unify us — that Nancy Pelosi’s visit to fantasy island and handout heaven is not going to work,” Mr Barrasso told the Financial Times.
Market reaction to the jobs report was muted. Treasuries sold off following the release, sending the yield on the benchmark 10-year Treasury note nearly 0.01 percentage point higher to 0.54 per cent. Shorter-dated Treasuries were flat, with the yield on the two-year note steady at 0.12 per cent.
Gold prices edged lower from their record high levels, falling to $2,055 per troy ounce, while the dollar index rose marginally.
US equity futures point to a slight drop when trading begins in New York. The S&P 500 is slated to decline by 0.29 per cent
Follow Demetri Sevastopulo on Twitter: @dimi