U.S. economy added 850,000 jobs in June as labour market showed renewed strength
The U.S. economy added 850,000 jobs in June as the pace of the recovery surged — quieting fears, at least temporarily, of more lasting harm from labour and supply shortages.
The unemployment rate changed little, ticking up to 5.9 per cent from 5.8 per cent.
The news is likely to be seen as a good sign for the economy more than one year into the pandemic, after numerous wrinkles have emerged to complicate a labour recovery many hoped would be faster at this level of vaccinations. It was the largest number of jobs added in a month since last August, during early months of the labour market's recovery.
“It's a pretty strong report,” said Kate Bahn, an economist at the Washington Center for Equitable Growth. “This overshot expectations. And the job growth was in the industries that had been so hard hit. This is pointing to signs that we're growing back exactly where we need to be growing back.”
Employment jumped in the leisure and hospitality sector, with 343,000 jobs added, more than half of that in restaurants and bars. Hotels and other accommodations, as well as arts, entertainment and recreation entities, both added about 75,000 jobs.
In local and state government education, employment increased by 230,000.
Retail added 67,000 jobs, with strong growth in clothing and merchandise stores.
Average earnings too, continued to increase, climbing 10 cents for all employees to US$30.40 an hour, following larger increases in May and April. The Bureau of Labor Statistics said the wage increases reflect increased demand for labour at this stage of the recovery.
In the leisure and hospitality sector, an often low-wage industry that has been a focal point of the debate about a labour shortage, wages for nonsupervisory workers have risen markedly for the quarter, according to Diane Swonk, chief economist at Grant Thornton — up 87 cents an hour since April, the largest increase in a quarter in the history of the data. Since January, those wages are up about US$1.55, she said.
“It's pretty stunning,” she said. Job growth in April, revised down to 269,000, and May, revised up to 583,000, while not anemic, fell well below the hopes that more than one million jobs could be added per month in the spring. Republicans had tried to seize on those reports to suggest that U.S. President Joe Biden's economic agenda was falling short.
But June's report blew through projections, surpassing analysts' estimates that around 700,000 jobs would be added in the month. Still, the economy is down 6.8 million jobs from where it was in February 2020.
Drew Matus, chief market strategist for Metlife Investment
Management, said that he was concerned about the increase in unemployment, which comes from a separate survey than the figure for jobs added.
“A lot of the employment gain, let's call it a quarter, was in state and local government education hiring,” he said. “Could be seasonal, that pushed the headline number higher.”
The labour force participation rate ticked up nominally for men and women over the age of 20, but declined for teenagers, and overall remains significantly lower than it was before the pandemic.
Modest job declines in motor vehicle manufacturing of about 12,000, and construction, of about 7,000, could be a sign of material shortages continuing to plague some sectors of the economy, Matus said.
Supply chain issues have been effecting those industries — microchips for vehicle makers, lumber for builders — helping to drive up prices and complicate the recovery as consumer demand and activity rebounds. And inflation remains a concern of top policy-makers in Washington, after more than a year of low interest rates and stimulus measures have helped fire up the economy.
Economists have looked to the leisure and hospitality sector — still down more than two million jobs from before the pandemic — for signs of a reawakening jobs market, as caseloads remain low and vaccination rates continue to crawl upwards.
There are other positive signs, too.
Air travel has climbed significantly in recent months and the Fourth of July weekend is expected to continue the trend. According to an estimate by AAA, travel for the holiday is expected to increase by 40 per cent compared to last year and nearly reach pre-pandemic levels, with an estimated 47.7 million people travelling.
Consumer spending, on services like restaurants, entertainment and transportation has been increasing in recent months. And the stock market has continued to boom, closing out the first half of the year at record highs. The Congressional Budget Office is now forecasting an unemployment rate of just 3.6 per cent by the end of 2022, adjusting its expectations downward amid the economy's expansion.
Concerns of a labour shortage — and the role that the extra unemployment benefits may play in discouraging people from returning to work — have consumed the political debate in recent months, but economists have pointed to another factor they say likely plays a larger role: the fact that many schools had not fully reopened by the end of the academic calendar.
But many are forecasting even stronger months of growth in the fall after schools fully reopen, allowing many parents to return to work.