The U.S. Economy Added 850,000 Jobs in June

The U.S. economy added 850,000 jobs in June and the unemployment rate ticked up to 5.9 percent, the Labor Department said Friday.

The median forecast of analysts surveyed by Econoday was for 703,000 jobs and an unemployment rate of 5.6 percent.

The better than expected June figures follow big misses in both May and April.  The May jobs number was revised up from the preliminary estimate of 559,000 to 583,000 in May and April was revised down from 278,000 to 269,000.

Labor force grew by 272,000, meaning more people are looking for work, which accounts for the unexpected rise in unemployment.

Those reports were taken as evidence to the claim that hiring is being held back by enhanced unemployment benefits, prompting Republican governors to bring those programs to an early end in around 25 states.

The economy has outperformed expectations on many metrics this year as vaccinations have boosted business and consumer confidence and restrictions on businesses have been lifted. The decisions by governors to end enhanced unemployment benefits, which pay an extra $300 a week, appear to have prompted some Americans to return to work in June.

Republican-led states have seen much stronger labor markets in the post-pandemic era. Eighteen of the top 20 states for jobs recovered since the coronavirus pandemic hit have Republican-controlled legislatures. Sixteen of these 18 states have Republican governors.  Seventeen out of the top 20 states with the lowest unemployment rates have Republicans controlled legislatures.

The leisure and hospitality sector added 343,000 jobs, as pandemic-related restrictions continued to ease in some parts of the country. This was the part of the economy that was hardest hit by lockdowns and social distancing rules. It was also the sector where enhanced unemployment benefits appeared to be causing the biggest problems for employers looking to hire back workers. Over half of the job gain in this sector was in food services and drinking places. Despite the gains in recent months, employment in leisure and hospitality is down by 2.2 million,
or 12.9 percent, from its level in February 2020.

Employment in professional and business services rose by 72,000 in June but is down by 633,000 since February 2020. Retail trade added 67,000 jobs in June, but employment is down by 303,000, or 1.9 percent, since February 2020. Clothing and department stores added jobs in the month while grocery stores shed 13,000.

Employment in manufacturing added only 15,000. Automakers and parts manufacturers shrank payrolls by 12,000, likely a reflection of the chip shortage that has hindered the sector, while furniture makers added 9,000 jobs, likely a reflection of the ongoing housing boom. Employment in manufacturing is down by 481,000 from its level in February 2020.

The labor force participation rate was unchanged at 61.6 percent in June. This figure has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020, suggesting that the recovery still is not drawing back many Americans who left the labor force during the pandemic. The participation rate is 1.7 percentage points lower than in February 2020. The employment-population ratio was also unchanged at 58.0 percent. This measure is 3.1 percentage points below its February 2020 level.

The number of persons “employed part time for economic reasons” decreased by 644,000 to 4.6 million in June. This decline reflected a drop in the number of persons whose hours were cut due to slack work or business conditions. These are people who would have preferred full-time employment but say they are only working part time because their hours had been reduced or they were unable to find full-time jobs. Some economists regard this as the best measure of tightness or slackness in the labor market.

Americans are increasingly working from offices and away from home. Just 14.4 percent of employed persons teleworked because of the coronavirus pandemic, down from 16.6 percent in May and 18.3 percent in April.

Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $30.40 in June, That represents a slowdown in wage pressures following the 13 cent gain in May and 20 cent gain in April.  Average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents to $25.68 in June. That is also a slowdown in wage hikes from May’s 14 cents and April’s 19 cents.