After two months of lower than expected job gains, new jobs data has brought some cheer to those looking for a faster economic recovery. The U.S. added 850,000 jobs in June, according to the monthly employment report from the Bureau of Labor Statistics, far surpassing the 700,000 expected by analysts and the 559,000 jobs added in May.
Heidi Shierholz, director of policy at the Economic Policy Institute and a former economist at the U.S. Department of Labor, captured the general sentiment with a tweet pointing out that the economy is on track to recover five times faster than it did after the Great Recession.
However, the unemployment rate rose from 5.8 to 5.9 percent, and the number of unemployed persons held around 9.5 million. Labor force participation rate was flat at 61.6 percent, and the number of long-term unemployed, which includes those jobless for 27 weeks or more, increased 233,000 to four million following a decline of 431,000 in May.
There also continues to be significant turnover in the job market. The number of people voluntarily leaving their jobs to seek out other opportunities increased by 164,000 to 942,000.
The sectors that did see solid gains include retail, business services, public and private education, and, most notably, hospitality and leisure, which added 343,000 jobs.
Show Me the Money
Within the hospitality category, more than half of those gains came from food and alcohol businesses, following the full reopening of indoor dining in most parts of the country. Wages within the sector also made steady gains, hitting an average of $16.21 per hour in non-supervisory roles, up from $14.58 in June 2020.
Overall, private nonfarm payrolls rose by 10 cents to $30.40 in June, down from 13 and 20-cent gains in April and May respectively.
Whether these small gains show that the pandemic recovery is driving up wages remains unclear, but the Bureau of Labor Statistics continues to suggest that a link is possible.
"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," the report said. "However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings."
Many economists were watching closely to see how persistent labor shortages, which have led employers to offer bonuses and other incentives to fill their positions, would impact wages.
"If we're not seeing wages rise, that would be one of the reasons that overall employment numbers will not be as good as people think," Tom Kozlik, head of municipal research and analytics at HilltopSecurities Inc., said on Thursday before the release.
The report also potentially offered a first-look at how nearly half of U.S. states cutting off extra unemployment insurance — or saying they will soon — impacts the numbers.
"About half the states have eliminated supplemental unemployment insurance, creating an incentive for people to search for jobs and fill many of the positions that remain open," said Mace McCain, chief investment officer at Frost Investment Advisors.
This lines up with the narrative many employers have presented as the reason behind the labor shortage, but proving a direct correlation is difficult, especially as several states had yet to cut off their extra unemployment benefits when the data was recorded.
Kozlik pointed out that it may take another month to see the full impact.
In the meantime, the U.S. economy is still down 6.8 million jobs from before the pandemic, and the structural shifts underway are still working themselves out.
"There's going to be a larger structural shift as a result of what we've gone through over the past 12-16 months," Kozlik said on Thursday. "We're not going to have the entire picture [Friday]."
Kozlik quoted Federal Reserve Chairman Jerome Powell's recent comments before Congress:
“This is an extraordinarily unusual time and we really don’t have a template or any experience of a situation like this, and so I think we have to be humble about our ability to understand the data,” Powell said last week.
Numbers You Should Know
Breaking down all the implications of the latest jobs report will take some time, but here are some quick numbers on the course of the recovery:
Amid a nationwide boom in warehouse construction, the sector added just 14,000 jobs.
