Skip to Content
Tally logo

News: Unemployment Shrinks in July but Remains Higher Than Normal

Unemployment numbers tumbled as July closed out, but uncertainty remains.

Justin Cupler

Contributing Writer at Tally

August 20, 2021

As we trudge through the COVID-19 pandemic, the U.S. economy continues its slow but steady recovery. Evidence of said recovery is the July jobs report, which showed a continued downward trend in new unemployment claims that even came in slightly below consensus estimates.

Let’s explore the July jobs report, what the numbers mean and what may be driving them. 

Unemployment claims are down but still too high

The jobs report indicates that nonfarm payroll rose by 943,000 last month, driving the unemployment numbers down another half a percentage point to 5.4%. This brings the total out-of-work Americans down to 8.7 million, continuing June’s downward trend.

Long-term unemployment numbers — those who’ve been out of work for 27 weeks or longer — also fell by 560,000 to 3.4 million. However, short-term unemployment — those unemployed for five weeks or fewer — rose 276,000 to 2.3 million in July.

Overall, the job report continues painting a good picture, but there is still much work to do in the grander scope. The 8.7 million unemployed Americans is still 3 million more than before the pandemic. As for long-term unemployment, that is up 2.3 million compared to pre-pandemic levels.    

Monthly jobs reports are only a piece of the economy’s puzzle, but we’ve witnessed relatively consistent upward trends in employment numbers over the past year. We’ve seen particularly strong growth over the past two months — June and July — as nearly 1.8 million out-of-work Americans took new jobs. 

What’s behind all this sudden employment growth? 

Kids heading back to school

More recent trends show continued unemployment claims have shrunk by over 1 million since July 10. A key driver to this could be kids heading back to school and freeing up parents to take on jobs. 

During the summer months, parents often need someone to care for their kids while they work. But with COVID-19 and the new Delta variant still a big risk, many may have felt insecure leaving their kids with a caregiver, couldn’t find one or care wasn’t financially feasible. 

With the summer ending and school bells ringing, many parents are likely entering the workforce again. 

Expiring extended unemployment benefits

The American Rescue Plan of 2021 extended unemployment benefits through the first week of September 2021 and included a $300-per-week bonus to each state’s unemployment compensation. 

Some experts claimed these extended benefits were keeping some workers at home until the benefits expired. These beliefs pushed some states to cut the extended benefits early in hopes of closing the labor gap. 

With those benefits nearing expiration nationwide, more out-of-work Americans could be heading back into the workforce. And with massive labor shortages, companies are starving for employees and are ready to bring these new workers into the fold. 

Delta variant could slow growth

The Delta variant of COVID-19 has thrown some things into reverse, as CDC mask recommendations are making a comeback and mandates are under constant debate. The Delta variant may also have a hand in future jobs reports. 

As the Delta variant sweeps across the country, this leaves us with some uncertainty in how the U.S. economy will respond and if future jobs reports will be as strong as July.