Wallstreetjournal.com:
A strengthening U.S. labor market added cushion to the economic recovery in July ahead of the Delta variant threat, with employers creating jobs at the best pace in nearly a year and the unemployment rate falling sharply.
Nonfarm payrolls rose by a seasonally adjusted 943,000 in July, from June’s upwardly revised gain of 938,000, the Labor Department said Friday. The July jobs increase was the largest since August 2020.Payrolls, change since January 2020.
The unemployment rate, derived from a separate survey of households, fell to 5.4% in July from 5.9% in June. The July jobless rate was the lowest since March 2020, when the coronavirus pandemic first took hold in the U.S. The number of Americans working or seeking work last month rose, and wages increased at a faster rate, especially for restaurant workers.
Friday’s report showed that the U.S. economy is facing any threat posed by the Delta variant with a strong tailwind. The economy has recovered rapidly this year with availability of vaccines, business reopenings, pent-up consumer demand and aid flowing from multiple rounds of government stimulus legislation. Falling unemployment and rising wages further reinforce underlying strength, and so far there is little evidence to suggest that the recent case surge is significantly slowing the U.S. recovery.
The surveys for the jobs report were conducted in the middle of the month. That was before some local governments reimposed mask mandates and other restrictions, and before many employers announced they would require employees to wear masks, be vaccinated or get regularly tested. Companies have also delayed return-to-office plans, including announcements by Amazon.com Inc. and Wells Fargo & Co.
“This not only was a strong jobs report by nearly every measure, it also signals more good things to come,” said Robert Frick, corporate economist at Navy Federal Credit Union, adding that the report reflects little about the rising cases tied to the Delta variant. “The effect this will have on jobs, especially in the leisure and hospitality industries, is unknown, though so far it appears to be minimal.”
Leisure and hospitality jobs, including restaurants, rose by 380,000 in July, reflecting Americans’ renewed interest in dining out and traveling this summer. Services businesses were hit hard earlier in the pandemic and would be among the first to face setbacks if Delta triggers restrictions that limit their operations. The hospitality industry still has 1.7 million fewer jobs than in February 2020, a large share of the 5.7 million jobs employers have yet to recover from the pandemic downturn.
Employment at public schools rose by 221,000, likely showing many schools are offering larger summer programs to help students catch up after pandemic disruptions. Employment in the transportation and warehouse sector rose by 50,000 and employment in manufacturing increased by 27,000.
Retailers were among the few categories to lose jobs, down by 5,500, driven by a decline at building materials and hardware stores.
The broad gains are consistent with private surveys showing the services sector expanding at a faster rate in July than the prior month. Likewise, the average number of seated diners in the last week of July was above the last week of June, according to reservation service OpenTable. Worker filings for initial jobless claims, a proxy for layoffs, have remained steady in recent weeks despite the Delta-related surge.Change from a year earlier in weekly earnings and inflation for:Sources: Labor Department (earnings); FederalReserve Bank of St. Louis (inflation).
Some local governments and businesses have reimposed mask mandates, but have avoided a repeat of last spring’s broad closures. However, New York City this week said it would require people to show proof of vaccination for indoor activities such as dining, gyms and events, and the New York Auto Show, set for later this month, was canceled because of the variant. Similar policies and cancellations, if adopted more widely, could have a chilling effect on consumer behavior.
“We haven’t seen too many strict quarantine measures—masks aren’t closures” in terms of economic impact, said Beth Ann Bovino, U.S. chief economist at S&P Global. The U.S. faces little risk of falling back into recession, and job growth should continue this fall, she said. But Ms. Bovino said the Delta variant could make her forecast for employers to add 600,000 jobs a month through the end of the year too optimistic.
The summer opened with strong demand for workers. A record 9.2 million jobs were available at the end of May, according to the Labor Department. The pandemic abating at the start of summer and enhanced unemployment benefits in about half of the states ending in June and July appears to have prompted some more job searching.Unemployed workers returning to work made up most job gains after the recession, but since August, labor-force growth has been a bigger source of employment gains.
Friday’s report showed a net 261,000 workers entered the labor force, indicating better wages and ample opportunities are drawing some off the sidelines, but the gain isn’t enough to keep up with strong hiring, causing the unemployment rate to fall.
Jon Neff, chief operating officer of the Atlanta-based Hire Dynamics staffing firm, said he was seeing strong demand for workers among his clients. He said applications from job seekers were up 17% in the last four weeks of July from the prior four weeks. He attributes the increase to moves by most states in the Southeast region, where the firm operates, to end enhanced and extended unemployment benefits.
About half of states have ended participation in federal programs that allowed workers to collect an extra $300 in benefits a week and stay on unemployment rolls longer than the six months allowed in most states. Those benefits are set to expire in the remaining states in early September.
“It’s been a fairly significant shift in the past few weeks,” said Mr. Neff. “But I still think it’s going to take a minute to get people who have been out of the workforce for a while to come back in, and that could be a drag on hiring.”U.S. unemployment rate by race.
Mr. Neff said more than half of clients, he said, have raised wages in the past year and starting pay for entry level jobs is near $15 an hour, in a part of the country where the minimum wage is $7.25 an hour in many states. He also said applicants want both full-time jobs and flexible schedules.
Workers’ wages rose 4% from a year earlier, a sign of a tight labor market. Wage for leisure and hospitality workers, the lowest paid group, increased nearly 10% from a year earlier. Many restaurants are offering bonuses and better pay to draw workers into the labor force.
A growing construction sector and a fuller reopening of offices and medical facilities is driving sales—and hiring—at JM Brennan Inc., a Milwaukee mechanical contractor. Co-president Matt Brennan said the company had added more than 200 workers in little more than a year to bring its payroll to about 420, including eight plumbers hired last week. He said he would hire more employees, if he could find them.
“We’re as busy as we’ve ever been, and we’ve never had as many people as we do right now,” he said of the 89-year-old company. It has been a fast turnaround for Brennan, which cut its staff by about 80 in the spring of 2020 when many projects came to a halt.
Workers in short supply have meant projects are taking longer to complete, Mr. Brennan said, in part because suppliers and subcontractors also are having trouble hiring. Mr. Brennan said the company had raised wages to attract workers, and in turn passed that expense along to customers in the form of higher prices.
“Business is booming,” he said. “But I need to find the labor to meet the demand.”
