US economy adds 850,000 jobs in June as wages keep climbing

The United States economy added a robust 850,000 jobs in June while the unemployment rate was little changed at 5.9 percent, the US Bureau of Labor Statistics (BLS) said on Friday, as more unemployed workers came off the sidelines to rev up the nation’s jobs machine.

June’s headline jobs number was better than many analysts were expecting but not as strong as the most optimistic projections.

Still, after disappointing jobs growth in April and May, hiring is picking up steam as coronavirus vaccine rates continue to climb, and COVID-19 restrictions, such as mask mandates and capacity limits in restaurants and venues, keep rolling back.

In April, job openings in the US hit a record 9.5 million. June’s renewed strength in job creation signals that more unemployed workers are accepting positions that businesses across the country are scrambling to fill.

Whether it is the start of a trend though is unclear.

The labour force participation rate, which includes people who either have a job or are actively looking for work, was unchanged in June at 61.6 percent.

“The stronger 850,000 rise in non-farm payrolls in June may be a sign that some of the temporary labour shortages holding back the employment recovery are starting to ease,” Andrew Hunter, senior US economist at Capital Economics, wrote in a note to clients. “But with the labour force rising by just 151,000 and still more than three million below its pre-pandemic peak, we aren’t entirely convinced that this is the start of a much stronger trend.”

Some believe that the $300-a-week federal top-up to state unemployment benefits has disincentivised the unemployed to go back to work. In response, dozens of states have withdrawn or will soon withdraw from federal pandemic jobless programmes that include the top-up.

But economists cite other factors that could also be keeping the jobless from pounding the pavements in search of work, including an ongoing lack of available childcare options and fear of contracting COVID-19. Labour bottlenecks could also be a factor, as businesses reopen en masse, boosting demand for certain skills. And some workers may be opting to retire early.

To entice the jobless to accept positions, firms have been boosting wages. In June, average hourly earnings for all employees on private non-farm payrolls rose by 10 cents to $30.40. That followed a jump of 13 cents and 20 cents in May and April, respectively.

Average hourly wages of private-sector production and non-supervisory employees – a category that encompasses lower-skilled workers who typically earn less – rose by 10 cents to $25.68.

“Returning workers are earning more (as they should) – nominal hourly earnings of production non-supervisory workers are up 3.67% over this time last year,” tweeted Valerie Wilson, an economist at the progressive-leaning Economic Policy Institute.

But households in the US need fatter paycheques to deal with rising inflation. Compared with the same period a year ago, the personal consumption expenditure price index – the Federal Reserve’s preferred measure of inflation – was up 3.9 percent in May.

Rising prices hit less well-off households especially hard because they eat away at a larger share of their income.

It is also is feeding speculation that the Federal Reserve could raise interest rates soon. But the Federal Reserve has repeatedly vowed to keep prioritising getting Americans back to work over inflation fears by maintaining its cheap money policy until the labour market is fully healed.

Deeper dive

At 5.9 percent, June’s unemployment rate is still significantly higher than the pre-pandemic level of 3.5 percent.

And there were still 6.8 million fewer jobs in June than there were in February 2020. But the shortfall understates the true scope of the problem because the labour force and the economy have grown since then.

Remote work declined in June, with 14.4 percent of employed persons teleworking compared to 16.6 percent from the previous month.

Employment in leisure and hospitality – a sector brutalised by the coronavirus pandemic – added 343,000 jobs last month as virus restrictions continued to ease and expire. Over half of those gains were in food services and drinking places.

Accommodation – which includes hotels – also got a nice boost, adding 75,000 jobs last month. The sector still has 2.2 million jobs than it did in February 2020.

Retail trade added 67,000 jobs in June, but that is still 303,000 fewer jobs than February 2020.