25 January 2022

U.S. Added 850,000 Jobs in June Labor Rebound

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The U.S. labor market recovery is accelerating after a spring lull.

Employers added 850,000 jobs in June—the biggest gain in 10 months—and workers’ wages rose briskly, the government said Friday, both signs of robust demand for workers.

The unemployment rate, derived from a separate survey of households, rose to 5.9% last month from 5.8% in May. That was in part because of a positive development: A modest number of Americans came off the sidelines and entered the job search, expanding the labor pool. A broader measure of unemployment that takes into account workers stuck in part-time jobs and those too discouraged to look for work fell sharply last month.

Job growth lagged behind broader economic growth earlier this spring, with the economy adding 583,000 jobs in May and 269,000 in April. But big hurdles to hiring are starting to clear away. Rising vaccination rates, easing government restrictions on businesses and the expiration of unemployment benefits in many states are stoking the latest growth.

Workers are coming back to the labor market—albeit slowly—and employers, desperate to hire to serve a flood of customers, are dangling higher pay and other incentives such as signing bonuses. Hourly wages among private-sector workers rose 3.6% from a year earlier.

Meanwhile, fears of the pandemic are easing. The number of workers who said they were prevented from looking for work because of the pandemic fell by 900,000 in June to 1.6 million.

“In terms of the pace of hiring, this is probably close to max speed just given how quickly workers are coming back,” said Sarah House, senior economist at Wells Fargo. “Employers are making it work.”

U.S. stocks rose Friday after the employment report. For investors, the gains were further evidence the economic recovery remains intact, so far fulfilling predictions by Federal Reserve Chairman Jerome Powell.

The solid hiring figures aren’t likely to fundamentally change an intensifying debate within the central bank on how soon to reduce its $120 billion in monthly purchases of Treasury and mortgage securities. Some officials are eager to pull back on those purchases soon, while others have said the central bank doesn’t need to rush those decisions.

Despite the latest job growth, the labor market faces challenges. There are still 6.8 million fewer jobs than in February 2020. The jobless rate remains above its pre-pandemic level of 3.5%. And while the labor force grew last month, the gain was modest.

The share of adults working or looking for work was flat in June, remaining at 61.6%—1.7 percentage points below its pre-pandemic level—even though participation among prime-age workers, or those between 25 and 54 years old, rose from a month earlier.

Many workers have retired rather than attempt to get their old jobs back; others remain fearful of getting sick. Some economists and businesses say many former workers are reluctant to return lest they lose enhanced unemployment benefits that Congress and state governments provided to help laid-off workers cover living expenses during the pandemic.

But recent weeks appear to have brought a shift toward stronger job growth.

Perhaps no sector is heating up more than leisure and hospitality, which includes restaurants, bars, sports venues, museums and amusement parks. Nearly 1 in 4 jobs created last month were at restaurants and bars. Hourly wages for restaurant and other hospitality workers were up 7.9% in June from their pre-pandemic level.

“The floodgates have opened for events and food service and they didn’t open with regards to getting staff back,” said David Lombardo, general manager of Lombardo’s, a venue that hosts events in an ornate hall in Randolph, Mass., south of Boston.

After the pandemic hit the economy in March 2020 and forced the hospitality industry to shut down, the company laid off 140 of its 148 employees—servers, cooks, hosts and planners.

With pandemic restrictions lifted this spring and vaccination rates rising, the venue has fielded a stream of requests to host weddings, proms, bar mitzvahs, quinceañeras and other events. The company has hired back 40 people this year and is looking to hire 20 more. The company has raised wages 15% to 20% this year.

Lombardo’s isn’t alone: The broader leisure and hospitality sector could help lead job growth later this year and next, given Americans’ desire to resume vacations, concerts, restaurant outings and other activities.

“We’ve started to see, in the last week or two, a surge in applicants coming to our door,” Mr. Lombardo said. He thinks one reason is the looming expiration in early September of a government program that has provided jobless workers with $300 a week on top of standard state unemployment compensation.

Other employers raised wages as they continue to ramp back up and compete over a limited pool of workers. Compared with February 2020—the month before the pandemic plunged the U.S. into a recession—average hourly earnings among private-sector workers are up 6.6%. That is well above inflation, which rose 3.8% in May from the year before, according to the Labor Department’s consumer-price index.

In addition to leisure and hospitality gains, employers added more workers in sectors that were hard hit by the pandemic including retailers and the government, particularly teachers.

Employers ranging from national delivery companies to ride-sharing companies to fudge producers say they are primed to hire more and are trying to find ways to do so.

“While we have clear growth opportunities, the widespread labor shortages impacting many companies and industries across the U.S. is also impacting us through higher wage rates and lower productivity, particularly in the first quarter,” Mike Lenz, chief financial officer of FedEx Corp. , told investors during an earnings call last month.

Uber Technologies Inc. and Lyft Inc. are spending millions of dollars on incentives—including offering education programs and gasoline discounts—to entice drivers.

“There are hints of constraints easing but there are still a lot of kinks to work out,” said Ms. House of Wells Fargo.

Sung Won Sohn, professor of finance and economics at Loyola Marymount University, said many workers with new leverage in a tighter labor market are demanding not just higher wages but also more worker-friendly conditions, such as the ability to work from home more often, or in cities outside their companies’ home bases.

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