US economy added 1.8m jobs in July, beating expectations – as it happened

The US economy is rebounding, but at a slower rate than before – suggesting the economic damage caused by the pandemic and the lockdowns will be protracted.

The US economy added 1.8m jobs in July, more than expected but still a long way short of the previous month’s 4.8m jobs gain – perhaps unsurprising given further outbreaks and tighter restrictions.

That meant unemployment at 10.2%, again better than expected, but still at a level unprecedented since before the second world war.

There is likely to be a similar story in the UK, where the withdrawal of the government’s furlough scheme is likely to lead to a renewed jump in unemployment as we move towards winter, and the end of the job retention scheme on 31 October.

Chancellor Rishi Sunak today said he did not want workers to be “trapped” in furlough, suggesting he is unlikely to give in to opposition demands to extend the scheme to parts of the economy that are still unable to open.

Here are some of the other important developments from today:

• The Evening Standard newspaper, which serves London’s commuters, is to cut a third of its staff after a dramatic reduction in revenues during the pandemic.
• UK house prices took economists by surprise with a “mini-boom”, up 1.6% in July according to Halifax. It is not expected to last, however.
• The UK government has announced a £355m package to cushion Northern Ireland businesses from the costs of trading with the rest of the UK because of Brexit.
• More than 6,000 British Airways staff have accepted voluntary redundancy as the airline moves to tell thousands more cabin crew and ground staff whether or not they will keep their jobs or face pay cuts.
• TikTok threatened legal action in the US after an executive order issued by President Donald Trump said US companies have 45 days to stop all transactions with TikTok’s owner, ByteDance, as well as Tencent, the Chinese owner of WeChat.

You can continue to follow our live coverage of the coronavirus outbreak around the world:

In the UK, coronavirus’s community spread in England may be levelling off, says the Office for National Statistics

In the US, the death toll tops 160,000 as relief package impasse continues

In our global coverage, Norway advises citizens to avoid all travel abroad; PPE destroyed in Beirut blast

Thank you as ever for following our live coverage of business, economics and financial markets. Please do join us on Monday for more. JJ

As expected, Wall Street has dropped at the opening bell.

The major three indices have all dropped by about 0.4%. The S&P 500 remains short of its record high.

Another update from the Financial Times on the extraordinary story of Wirecard, the collapsed German payments company that is now under investigation by authorities in multiple countries.

The FT report (£) said:

German prosecutors suspect Wirecard was looted before its spectacular collapse in June, with $1bn funnelled to opaque partner companies even as the payments group fought allegations of accounting fraud.

According to people familiar with the probe and a document seen by the Financial Times, the embezzlement is suspected to have taken the form of unsecured loans, which Wirecard claimed were for advance payments to merchants processing card transactions through its partners in Asia.

(This reporter cannot wait for the book and film that will surely be made about the company and its spectacular collapse.)

It looks like Wall Street is set to dip at the opening bell in a few minutes’ time after the jobs data showed a slowing recovery – even if it was better than expectations.

Futures suggest the S&P 500 will lose 0.5%, the Nasdaq will fall 0.4% and the Dow Jones industrial average will lose 0.3%.

Sterling is now down by 0.7% against the US dollar in the wake of the jobs numbers.

One pound will buy $1.3061, down from $1.314 early this morning – although there has been some volatility (as ever) as traders digested the non-farm payrolls data.

The euro fell by 0.7% against the dollar, to $1.1799.

The US jobs beat could help the S&P 500 to a new all-time record high in the next few days (if not, perhaps, today). It is only 1.3% off the record level hit in February before the pandemic hit. But it does not all look rosy for the US economy.

Seema Shah, chief strategist at Principal Global Investors, said:

Does today’s number imply economic conditions are significantly improved? No – it simply suggests the labour market was static in July, showing no signs of renewed weakness that the increase in Covid-19 cases had threatened.

Nonetheless, with Congress failing to agree on a new fiscal stimulus package yet, the risk is that a policy failure drains the tentative strength that had been creeping back into the economy in recent months. With the unemployment rate still sitting above 10%, the pressure in Congress is still on.

The data suggest the recovery will still continue, albeit not particularly quickly, said Andrew Hunter, senior US economist at Capital Economics. He said:

The 1,763,000 increase in non-farm payrolls in July 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. With new infections now trending clearly lower again and high-frequency activity indicators showing tentative signs of a renewed upturn, employment should continue to rebound over the coming months.

Unsurprisingly given the renewed restrictions on bars and restaurants in many states, the slowdown was driven by the leisure and hospitality sector.

The jobs data, which suggest the recovery is slowing down, could add to pressure for more stimulus from the US government amid negotiations between Republicans and Democrats over further stimulus measures.

Here is the Reuters take:

US employment growth slowed considerably in July amid a resurgence in new Covid-19 infections, offering the clearest evidence yet that the economy’s recovery from the recession caused by the pandemic was faltering.

The unemployment rate fell to 10.2% from 11.1% in June, but it has been biased downward by people misclassifying themselves as being “employed but absent from work.” At least 31.3m people were receiving unemployment checks in mid-July.

The labor market step-back is more bad news for President Donald Trump, who is lagging in opinion polls behind former Vice President Joe Biden, the presumptive Democratic Party nominee for the 3 November election.

More reactions from economists and commentators who are suggesting the headline figures don’t quite tell the full story:

This chart shows just how bad it is for the US economy, despite the big jobs rebound. If the red line is anything other than a “V” it means a protracted period of gloom.