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Texas’ June unemployment rate falls to 8.6%, but experts warn unemployment could worsen next month

Texas’ June unemployment rate fell to 8.6% — a drop from the 13% May jobless rate, according to a Friday morning U.S. Bureau of Labor Statistics report.
Texas’ June unemployment rate fell to 8.6% — a drop from the 13% May jobless rate, according to a Friday morning U.S. Bureau of Labor Statistics report.

Texas’ June unemployment rate fell to 8.6% — a drop from the 13% May jobless rate, according to a Friday morning U.S. Bureau of Labor Statistics report.

While it’s an improvement from April’s record-high 13.5% unemployment rate, June’s figure shows the devastating financial toll on Texans as the coronavirus pandemic upends the economy. Before the pandemic began, the unemployment rate in February was 3.5%. Almost 3 million Texans have filed for unemployment benefits since mid-March.

Economists warn that the decrease in the state jobless rate may not indicate sustained economic stabilization, given that Texas businesses were open for most of June before Gov. Greg Abbott closed down bars, capped restaurant occupancy at 50% and limited outdoor gatherings of more than 100 people. Economists say that may prompt an increase in the July unemployment rate.

“The figures for June will not capture the impact of the governor reclosing bars and limiting social gatherings,” Richard Murphy, an assistant professor of economics at the University of Texas at Austin, wrote in an email.

Texas coronavirus hospitalizations and deaths have continued to hit record highs over the past several weeks as hospitals around the state are being overwhelmed with patients. For the majority of June, Abbott allowed almost all businesses to operate with at least 50% capacity.

“So we’ll have to really see how the COVID-19 growth rate really stabilizes, or does it go up or comes down even,” said Venkatesh Shankar, a marketing professor at Texas A&M University. “That also drives the unemployment statistics.”

Some things could help the economy, though. Shankar also said that the price of oil has stabilized at $40 per barrel after suffering a crash earlier this year.

“The unemployment rate could also go down because there are more jobs to be done in the oil and gas industry now than two months ago,” Shankar said.

If Abbott’s July 2 mask mandate slows the virus’ spread, that could also lift consumer spending and create jobs.

“The key to all of this lasting through this pandemic is figuring out: How can we interact with each other and with businesses in a safe way, whether it’s wearing a mask or other safety precautions?” said Pia Orrenius, senior economist for the Dallas Federal Reserve. “I think that has to be the secret to keeping the economy alive while protecting everyone from the virus.”

But so far, it’s too early to tell what impact the mask mandate has on the public health crisis or the economy.

“If people follow that, there could be more productivity and more work without the cases rising, so it should help, but since the mandate is only recent, we’ll have to see how many people follow that and how quickly it helps,” Shankar said. “So it should help, all else being equal.”

Sarah Zubairy, an associate professor of macroeconomics at Texas A&M University, said the ongoing coronavirus spread will inevitably affect the pace of economic recovery.

“We can not have a sustained economic recovery until we have the virus spread under control,” she wrote in an email.

Shankar encouraged Texans to follow public health guidelines, emphasizing their benefits to the Lone Star State’s economy.

“I think regulations like wearing masks, social distancing, disinfection, cleanliness, all of them should help stabilize the economy,” he said. “So there’s still ways to go and work to be done before employment rates can be brought down and economic growth can come back to normal levels.”

Reese Oxner contributed to this story.

Disclosure: Texas A&M University and the University of Texas at Austin have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.