The odds are rising that July will produce a poor employment report in the U.S. Nevertheless, as long as Congress delivers a fourth stimulus bill that continues to support the incomes of those out of work, the U.S. economy should be able to continue its slow recovery.
Last week’s initial claims data added further reason to be more cautious about the July jobs report, as it aligned with the payroll reference week—the week in which the survey for the July employment report is taken, which includes the 12th of the month—and notched its first increase since March.
Rising COVID-19 cases, greater restrictions across many states, and uncertainty over a fourth fiscal bill—and therefore financial uncertainty—have led consumers to pull back on spending and activities such as dining at restaurants. Consumer demand is the biggest driver of business activity, and if consumer demand pulls back in July—as high-frequency data suggests—businesses may respond by laying off workers. This would have big implications for the July employment report, which is scheduled to be released on Friday, August 7.