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