Economic Recovery Accelerates With 850,000 New Jobs

The gain shows the recovery from the coronavirus pandemic is picking up pace, but the U.S. is still down millions of jobs compared to February 2020.

(CN) — American employers added a robust 850,000 jobs in June, beating expectations and signaling a surge in momentum after a hiring slowdown.

Meanwhile, the unemployment rate ticked up 0.1% from 5.8% to 5.9%, according to a Labor Department report released Friday.

“Things are picking up,” said Nick Bunker, economic research director at Indeed Hiring Lab. “All that employer demand is turning into jobs and higher wages for many workers. While labor supply may not be as responsive as some employers might like, they are adding jobs at an increasing rate. This pace of progress is solid and it looks like things can get even better.”

The job growth in June far outpaced the revised 269,000 jobs added in April and 583,000 in May, and beat economists’ expectations of a gain around 700,000. But the U.S. economy is still down 6.8 million jobs compared to the pre-pandemic level in February 2020.

The leisure and hospitality industry, which includes restaurants and bars hit hardest by the pandemic lockdown orders, gained 343,000 jobs in June as more restrictions are lifted. Food and drink establishments added 194,000 jobs while accommodation and entertainment businesses each added about 75,000. Still, the sector as a whole is down 2.2 million since the coronavirus crisis hit.

The retail industry added 67,000 positions last month and professional and business services added 72,000, which includes 33,000 temporary positions. Education and health services gained 59,000 jobs while wholesale trade added 21,300 and manufacturing gained 15,000.

In the public sector, government agencies on the federal, state and local levels added a total of 188,000 jobs in June.

“There’s quite a bit of damage left to repair, but today’s report suggests that we may rebuild sooner rather than later,” Bunker wrote.

Over 22 million Americans lost their jobs in the spring of 2020, when the Covid-19 pandemic and government-imposed restrictions forced businesses to close their doors. Since then, more than 15 million jobs have been added back.

Joel Naroff of Naroff Economics said the strong payroll growth last month reflects the reopening of the economy.

“Another jobs report, another sign that the economy is getting back to more normal conditions,” he wrote. “Payrolls surged in June, which should have surprised nobody.  The removal of restrictions is allowing firms to rush out and hire, if they can, new employees.”

But he cautioned that businesses should be concerned about the slower growth of the workforce.

“The labor market is getting better, but don’t expect massive jobs gains to be repeated and don’t be surprised if for a while, the unemployment rate makes little progress in returning to full employment. That is just the way things work,” Naroff said.

He said the key factor to watch is the cost of labor.

“If wages keep rising sharply, firms will have to continue passing those expenses on to consumers. That would lead to an extended period of above trend inflation and if it runs through next year, which I think is possible, the Fed may be forced to move sooner rather than later,” he said, suggesting the central bank may need to raise interest rates to counter rising inflation.  

President Joe Biden celebrated Friday’s better-than-expected jobs report ahead of the Independence Day weekend.

“Our economy is on the move and we have Covid on the run,” he said in remarks from the White House.

The president said the recovery progress “is a testament to our commitment to grow the economy from the bottom up and the middle out.”

He touted his American Rescue Plan that was passed in March and said the $1.9 trillion coronavirus relief package has fueled the labor market growth. The bill included $1,400 direct payments to many Americans in addition to billions of dollars for testing, tracing and other initiatives to combat Covid-19.

The legislation faced strong Republican resistance and was passed with a simple Democratic majority in the Senate through the budget reconciliation process.

“None of this happened by accident, it’s a direct result of the American Rescue Plan,” Biden said. “People questioned whether or not we should do that, even though we didn’t have bipartisan support. Well, it worked.”

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