The economic recovery in the United States is powering forward, with the latest report card on the nation’s labour market showing a stronger-than-expected boost in jobs creation and a fall in unemployment in July. But clouds are gathering over the world’s largest economy as the Delta variant of the coronavirus rages across the country.
US employers added 943,000 jobs to their payrolls last month, the US Department of Labor said on Friday – beating many economists’ forecasts.
The unemployment rate fell by half a percentage point to 5.4 percent, while the number of Americans either in work or actively looking for a job ticked up ever so slightly from 61.6 percent in June to 61.7 percent.
That metric, known as the labour force participation rate, has been stuck in a narrow range of 61.4 percent to 61.7 percent since February 2020. It has emerged as a crucial barometer during the recovery because millions of workers who lost their jobs during the coronavirus pandemic remain on the sidelines, despite a record number of job openings in the US.
The number of unemployed workers in the US fell by 782,000 last month to 8.7 million. Meanwhile, there were 9.2 million jobs going begging in the US in May – the latest month for which data is available.
That mismatch has weighed on jobs creation, left businesses across the country scrambling to fill positions and sparked a fierce debate over why jobless workers are not taking advantage of so many job openings.
Some economists and observers point to factors such as workers opting to retire early, businesses opening at once chasing the same skill sets, an ongoing lack of childcare options, fears of contracting COVID-19, or a reluctance to comply with the growing number of businesses requiring employees to be vaccinated against the virus.
But others believe the $300-a-week federal top-up to state unemployment benefits is enabling jobless workers to be choosy about their next job. That belief has prompted dozens of states – all but one of them led by Republican governors – to withdraw early from federal pandemic unemployment programmes that are not set to expire until September 6.
By the time data was collected for the July jobs report, roughly half of the US states had ended the federal weekly top-up.
The labour supply crunch has compelled many businesses to make job offers more attractive with signing bonuses or wage increases.
That was reflected in average hourly earnings for all employees on private nonfarm payrolls, which increased by 11 cents to $30.54 in July – the fourth consecutive month of strong gains.
Average hourly wages also climbed for workers in lower-skilled, lower-paying jobs – increasing by 11 cents to $25.83 last month. That represented roughly a 0.4 percent gain over the same period a year ago.
“The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” said the US Department of Labor in a press release.
While millions of Americans, especially those in lower-paying jobs, are finally getting a long-overdue raise, those gains are being eroded by rising inflation as businesses reopen en masse, causing bottlenecks in supply chains.
And headwinds to the nation’s jobs recovery are potentially building as states and cities reintroduce COVID-19 restrictions in response to the Delta variant.
This week, New York City announced it will require people who want to dine at indoor restaurants, go to gyms or attend concerts and other entertainment events indoors to show proof of vaccination. The New York International Auto Show, which was set to take place later this month, was also cancelled in response to the Delta variant.
“The highly contagious Delta variant casts a shadow on the labor market recovery in the coming months, threatening to slow the return of workers still on the sideline due to childcare issues or health concerns,” US economists at Oxford Economics wrote in a note to clients on Friday.
The leisure and hospitality sector created 380,000 jobs last month, with two-thirds of that gain coming from food services and drinking places as consumers continued to come out of hibernation to eat at restaurants, travel and stay at hotels.
Some 221,000 jobs were created in local education as schools expand summer offerings to help students who fell behind catch up on their studies.
The economy added 27,000 manufacturing jobs last month. Jobs creation in the sector has been hampered by a crunch for raw materials such as semiconductors – a shortfall that is preventing factories from churning out enough goods to meet surging demand.
The unemployment rate for white workers fell from 5.2 percent in June to 4.8 in July, while the unemployment rate for Black workers fell from 9.2 percent to 8.2 percent. The unemployment rate for Latino workers fell from 7.4 percent in June to 6.6 percent in July.