The pace of U.S. hiring accelerated in June, with payrolls increasing by the most in 10 months, suggesting firms are having greater success recruiting workers to keep pace with the economy’s reopening.
Nonfarm payrolls jumped by 850,000 last month, bolstered by strong job gains in leisure and hospitality, a Labor Department report showed Friday. The unemployment rate edged up to 5.9% because more people voluntarily left their jobs and the number of job seekers rose.
The median estimate in a Bloomberg survey of economists was for a 720,000 rise in June payrolls. “Things are picking up,” said Nick Bunker, an economist at the job-search company Indeed. “While labor supply may not be as responsive as some employers might like, they are adding jobs at an increasing rate.”
The gain in payrolls, while well above expectations, doesn’t markedly raise pressure on the Federal Reserve to pare monetary policy support for the economy. Even with the latest advance, U.S. payrolls are still 6.76 million below their pre-pandemic level.
Demand for labor remains robust as employers strive to keep pace with a firming economy, fueled by the lifting of restrictions on business and social activity, mass vaccinations and trillions of dollars in federal relief.
At the same time, a limited supply of labor continues to beleaguer employers, with the number of Americans on payrolls still well below pre-pandemic levels.
Coronavirus concerns, child-care responsibilities and expanded unemployment benefits are all likely contributing to the record number of unfilled positions. Those factors should abate in the coming months though, supporting future hiring.
Wage growth is also picking up as businesses raise pay to attract candidates. The June jobs report showed a hefty 2.3% month-over-month increase in non-supervisory workers’ average hourly earnings in the leisure and hospitality industry. Overall average earnings rose 0.3% last month.
“The strength of our recovery is helping us flip the script,” Biden said in remarks Friday. “Instead of workers competing with each other for jobs that are scarce, employers are competing with each other to attract workers.”
The Labor Department’s figures showed a 343,000 increase in leisure and hospitality payrolls, a sector that’s taking longer to recover because of the pandemic.
Job growth last month was also bolstered by a 188,000 gain in government payrolls. State and local government education employment rose about 230,000, boosted by seasonal adjustments to offset the typical declines seen at the end of the school year.
Hiring was relatively broad-based in June, including other notable gains in business services and retail trade. However, construction payrolls dropped for a third straight month and manufacturing employment rose less than forecast.
“Most of the new jobs now being created are in sectors that were slammed by the pandemic, while companies in other industries are struggling to find available workers,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note.
The overall participation rate held steady and remained well short of pre-pandemic levels. The employment population ratio, or the share of the population that’s currently working, was also unchanged.
- Average weekly hours decreased to 34.7 hours from 34.8
- The participation rate for women age 25 to 54 rose by 0.4 percentage point; the rate among men in that age group also climbed
- The number of Americans classified as long-term unemployed, or those who have been unemployed for 27 weeks or more, increased by the most since November
- The U-6 rate, also known as the underemployment rate, fell to a pandemic low of 9.8%. The broad measure includes those who are employed part-time for economic reasons and those who have stopped looking for a job because they are discouraged about their job prospects
Stocks opened higher and Treasury securities fluctuated after the report.
The labor force is the actual number of people available for work and is the sum of the employed and the unemployed. The U.S. labor force reached a high of 164.6 million persons in February 2020, just at the start of the COVID-19 pandemic in the United States. The U.S. labor force has risen each year since 1960, with the exception of the period following the Great Recession, when it remained below 2008 levels from 2009-2011.
The labor force participation rate, LFPR (or economic activity rate, EAR), is the ratio between the labor force and the overall size of their cohort (national population of the same age range). Much as in other countries in the West, the labor force participation rate in the U.S. increased significantly during the later half of the 20th century, largely because of women entering the workplace in increasing numbers. Labor force participation has declined steadily since 2000, primarily because of the aging and retirement of the Baby Boom generation.
Analyzing labor force participation trends in the prime working age (25-54) cohort helps separate the impact of an aging population from other demographic factors (e.g., gender, race, and education) and government policies. The Congressional Budget Office explained in 2018 that higher educational attainment is correlated with higher labor force participation for workers aged 25–54. Prime-aged men tend to be out of the labor force because of disability, while a key reason for women is caring for family members.
The Congressional Budget Office explained in 2018 higher educational attainment is correlated with higher labor force participation. Prime-aged men tend to be out of the labor force due to disability, while a key reason for women is caring for family members. To the extent an aging population requires the assistance of prime-aged family members at home, this also presents a downward pressure on this cohort’s participation.