By Sarah Chaney
The U.S. economy likely regained millions of lost jobs in June, though a rise in coronavirus infections in several states could hamper the labor market's recovery.
An increase in the number of employed workers, if reflected in Thursday's jobs report, would show Americans are slowly getting back to work and further improvement from the labor market's April bottom. But it would still leave the U.S. with about 17 million fewer jobs than in February, the month before the coronavirus pandemic struck the U.S. economy.
Economists surveyed by The Wall Street Journal expect employers added 2.9 million jobs in June, following May's payroll gain of 2.5 million, and an unemployment rate of 12.4%, down from 13.3% in May. Before the coronavirus drove the U.S. into a deep recession, the jobless rate was hovering around a 50-year low of 3.5%.
Hiring last month was supported by business reopenings and government aid. States across the U.S. reopened restaurants, gyms and salons that had been shut for several weeks to contain the spread of the coronavirus. Small businesses that tapped federal loans through the Paycheck Protection Program continued to recall workers.
"We're in the beginning of a slow recovery," said Marianne Wanamaker, a labor economist at the University of Tennessee, who previously served as an economist in the Trump administration. "I think the recovery will stall out if we don't get control of the virus."
Some states are reversing or pausing reopening plans as coronavirus infections surge in the South and West. Thursday's jobs report, which is based on survey data largely collected in mid-June, won't reflect these recent government-mandated business closures and related layoffs. The report is coming out a day earlier than usual because Friday is the observed Independence Day holiday.
A separate report from the Labor Department, also to be released Thursday, tracks the number of applications for unemployment benefits filed every week. Unemployment claims have come down from a peak of nearly 7 million in late March but have stabilized near a historically high 1.5 million, an indication companies continue to cut jobs.
"The big picture is this is still an emergency," said Lisa Cook, economics professor at Michigan State University. "There are small businesses and other businesses that are permanently closing."
States where the coronavirus is spreading the most are experiencing a slowdown in economic activity, investment-banking firm Jefferies said at the end of June. The number of hours worked at small businesses hit its most recent peak in mid-June and has since dropped off in places including Texas and Arizona, data from scheduling and hiring software provider Homebase show.
In recent days, Texas required that bars close and Florida imposed new restrictions on bars. New York Mayor Bill de Blasio announced that the city would delay the planned reopening of indoor dining at restaurants.
Tubing rental company Texas Tubes won't be open to send customers floating down the 2-mile Comal River this Fourth of July weekend -- normally one of the busiest times of the year for the New Braunfels, Texas, company.
Last week it had to cease operations and lay off its staff of about 30 employees when Gov. Greg Abbott ordered the halt of water-recreation outfitters, said Texas Tubes' owner, Coley Reno.
"Our season is only so long, so if this thing goes to September, then we're done for the year," Mr. Reno said. He added that the tubing center's closure would hit the small Texan city's tourism economy because there would be fewer out-of-town guests to dine at nearby restaurants and sleep in Airbnbs.
Still, many industries have been able to add workers after experiencing losses earlier in the economic crisis. In May, U.S. restaurants and bars -- one of the sectors hardest hit by the virus -- added 1.4 million jobs, a trend that likely continued in June as more states reopened their economies.
At the beginning of the pandemic, customer traffic declined and hiring froze at Teriyaki Madness, a Denver-based franchised restaurant chain.
"But then people kind of woke up and said, 'This could last for a while, '" said Michael Haith, the company's chief executive.
Consumers started ordering more online and driving in for curbside pickup of teriyaki chicken-and-rice bowls, helping boost same-store sales at Teriyaki Madness. Now the fast-casual chain is adding 10 stores that will need 25 employees each in positions such as cook, cashier and general manager.
The economic effects of the pandemic have varied across demographic groups. The jobless rate in May was 17.6% for Latinos and 16.8% for Black people, compared with 15% for Asian-Americans and 12.4% for white people.
The economy entered a recession in February and appeared to begin a recovery as early as April. The speed at which businesses hire and consumers spend depends, in large part, on the course of the virus. Many Americans remain hesitant to shop in stores or eat at restaurants as coronavirus cases increase.
Stephanie Casebeer, 45 years old, has been temporarily out of work during the pandemic as a group fitness instructor at Miami-area gyms.
She said many of her students have indicated they aren't ready to return to in-person workouts, and gyms have continued to delay reopening yoga and cycling classes as coronavirus cases in Florida rise. She worried it will be tough financially for gyms to rely on virtual classes.
"It's made me nervous," she said. "How am I going to make my living doing what I enjoy for the next couple of years?"
Ms. Casebeer said unemployment benefits, which include an extra $600 a week from a federal stimulus bill, have helped her while she is without a job. She is still eager to return to teaching classes even though she makes more on unemployment benefits than she would as a group-fitness instructor.
"I like what I do enough to not necessarily care about keeping the extra $600," Ms. Casebeer said. "I want to go back to work, and I want to go back to work safely."
The June jobs report will likely inform congressional debate over the next federal coronavirus relief bill. Republicans and Democrats have been at odds over whether to extend the additional $600 a week in jobless benefits, scheduled to run out at the end of July.
Republicans pointed to May's stronger-than-expected job growth as evidence workers no longer need expanded unemployment benefits. Democrats have argued that millions of people remain jobless and need extended aid to keep paying bills.
Some small businesses are already running through loans from the federal government's Paycheck Protection Program, which was designed to help companies keep workers on payrolls.
"Many owners received their loans in April and can no longer afford to keep workers past June," the National Federation of Independent Business said.
Jennifer Cumming owns Foundational Concepts, two physical therapy clinics in Overland Park, Kan., and Kansas City, Mo. She was able to use the federal small-business loans to rehire employees this spring after they were furloughed at the onset of the pandemic.
But when the federal funds -- which lasted eight weeks -- expired in mid-June, Ms. Cumming wasn't able to guarantee stable paychecks for three of the company's 10 employees, who quit as a result. Ms. Cumming said she didn't plan on immediately replacing all of them, given the recent climb in coronavirus cases in her area.
"We want to be smart and not overextend ourselves," she said.
Write to Sarah Chaney at sarah.chaney@wsj.com
