By Sarah Chaney 

Employers added 1.8 million jobs in July, indicating the U.S. economic recovery continued but lost some momentum during the summer coronavirus surge.

July's job gain was slower than the previous two months, when payrolls grew a combined 7.5 million as many states lifted lockdown restrictions on businesses. There are now about 13 million fewer jobs than in February, the month before the coronavirus hit the U.S. economy.

The unemployment rate fell to 10.2% last month after hitting a peak of nearly 15% in April, showing people continued returning to work. The Labor Department said the greatest employment growth occurred in the hospitality, government, retail, business services and the health-care sectors.

"We're in a pretty strong rebound," said David Berson, Nationwide chief economist. "But the downturn was so big -- the hole that was dug was so deep -- that it will still take probably at least a couple of years to dig ourselves out."

Unemployment remains historically high. Before the coronavirus drove the U.S. into a deep recession this year, the unemployment rate was hovering around a 50-year low of 3.5%.

Labor-market gains have been uneven. Jobless rates for whites, Asians and Hispanics declined in July, while holding steady for Black workers.

Unemployed individuals reporting their layoffs as temporary declined last month, and the number who saw their job losses as permanent remained nearly the same, positive signs for the recovery. Still, the number of people unemployed for an extended period -- 15 to 26 weeks -- jumped by 4.6 million to 6.5 million workers, showing it will take time for the labor market to recover.

Eric Lanser, age 34, of Boston, has seen job prospects improve since he was furloughed from a small investment-banking firm in March.

At the onset of the pandemic, he reached out to several firms but none was hiring because activity in mergers and acquisitions had dried up. Mr. Lanser said demand for investment-banking services appears to be increasing now, and as a result, he has more job leads.

"I'm feeling much more optimistic," Mr. Lanser said.

The economy entered a recession in February and appeared to begin a recovery as early as April. Economists say the speed at which businesses hire and consumers spend depends, in large part, on the course of the virus. Many consumers remain hesitant to resume store visits, dine out or board planes as virus cases remain high. Some businesses face renewed government restrictions.

Jeremy Murray's patio bar in Austin, Texas, closed for 12 weeks starting in March, then had only reopened for about a month when it was forced to shut down for a second time in late June, as Texas grappled with a surge in reported Covid-19 cases. The bar, called Kitty Cohen's, was making about a third of the revenue it had in the same month last year, Mr. Murray said, but at least the money was enough to cover rent and other expenses.

"It was pretty deflating," said Mr. Murray, who furloughed all eight of the staff he had brought back to work at the bar. Another 10 employees have been on furlough since the spring. "I just remember really fighting back some serious emotions," he said.

A Federal Reserve Bank of St. Louis analysis found that states with a larger number of coronavirus infections cases since June saw the weakest job recoveries between early June and late July. Arizona, Florida and Texas were among the states with the sharpest increases in coronavirus cases and mild employment recoveries, the report said.

A Cornell University survey separately found that 31% of recalled workers had recently been laid off a second time, with most of these layoffs occurring in states without large virus surges.

New job postings are increasing in three main categories, according to ManpowerGroup: jobs that are transforming business, such as software developers; jobs that are moving things, such as delivery drivers; and jobs that are helping people, such as physicians.

The labor-market recovery depends on employers' confidence and ability to meet employees' desire to feel safe returning to work, said Becky Frankiewicz, president of ManpowerGroup North America.

"It's not just about the economic conditions in the state or the status of the virus, it's about how people feel," she said.

Desert Orthopaedic Center in Las Vegas is looking to add a couple of physicians to its practice. The medical company had reduced staff hours in several departments after patient visits and surgeries fell steeply beginning in mid-March, said Chief Financial Officer Jim Washer.

"I think a lot of it was just due to people hunkering down and staying inside and not going anywhere," he said.

By early May, patient visits were climbing and Desert Orthopaedic workers returned to regular 40-hour weeks. Mr. Washer said the business rebound was likely a result of patients' need for medical care and relative comfort coming to a doctor's office.

He fears, though, that patient numbers could drop again if the Las Vegas economy deteriorates.

"I have an uneasy feeling that I shouldn't get too comfortable that things are back to normal," Mr. Washer said.

The July jobs figures could influence the policy debate in Washington on extending extra unemployment benefits for millions of workers. A $600 a week benefit expired at the end of July.

The extra benefits helped Tracy Menasco, 51 years old, pay rent, grocery bills and student loans during the pandemic. The Spokane, Wash., resident was temporarily laid off from her sales job in April, and she was then told in June that her position was permanently eliminated. She said she hopes her savings will help cover costs since the supplemental jobless aid ended.

"I've stashed away what money I can, and I'm just trying to watch my budget and be careful," she said.

Ms. Menasco has been applying for jobs since June, but she hasn't had much luck, which she said is uncommon for her industry.

Sales jobs are "usually the last to go or the first one in, and it doesn't seem to be safe in this economy," she said.

--Kim Mackrael contributed to this article.

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

August 07, 2020 11:08 ET (15:08 GMT)