U.S. Jobs: Post-COVID Economic Recovery Is Stabilizing

After a down month in April (278,000 jobs added, revised downward to 269,000 in the latest Employment Situation Summary) and weaker-than-expected growth in May (559,000 jobs added, revised upward to 583,000), the June jobs tally came in at a solid (and relieving) 850,000 jobs added.

Unemployment now stands at 5.9 percent, and the number of unemployed persons at 9.5 million, little changed from May levels. That said, growth levels within arm's reach of 1 million jobs added definitely shows stronger evidence of an ongoing recovery. June suggests that fears about jobs remaining unfilled might start to subside.

Where last month's report underwhelmed and failed to meet expectations, this month's report turned out better than many labor economists were expecting. Consensus forecasts hovered around 700,000 new jobs, so reported numbers came in more than 20 percent higher than expectations.

We've also seen wages increasing more in the last three months than in recent memory: up 13-cents-per-hour in April, 20-cents-per-hour in May, and another 10-cents-per-hour in June, for an average hourly wage now in excess of $30 ($30.40, to be precise) for all employees on private nonfarm payrolls.

Where Job Growth Occurred Is Where You'd Expect It

The big winners for June were areas where employment is volatile, and where the recovery is most evident. Leisure and hospitality added 343,000 jobs, with more than half that number in eating and drinking establishments (bars and restaurants). Hotels and accommodations, as well as arts, entertainment, and recreation each added around 75,000 jobs.

Local government education added 155,000 jobs (75,000 at the state level, 39,000 in private education, and the remaining 41,000 at the local level) as schools gear up for a general return to the classroom this fall. Professional and business services added 72,000 jobs, and retail trade added 67,000 jobs, along with other services adding 56,000 jobs.

Social assistance (32,000), wholesale trade (21,000), mining (10,000), manufacturing (9,000), and transportation and warehousing (11,000) all eked out modest gains. Construction took a slight dip (-7,000), while other sectors were mostly flat (information, financial services, and healthcare).

Supply chain issues continue to depress growth in some sectors — such as computer chips for automobile makers and lumber for construction. Alas, these impose a kind of double whammy on the economy. On the one hand, scarcity drives prices up. On the other, lack of raw materials means less finished product to sell, with lower profits and productivity, and fewer calls to hire new employees to meet strong demand.

In general, though, all other signs point to ongoing and possibly accelerating recovery. The national vaccination rate is above 50 percent mark, and more consumers are starting to, well, consume as they pursue the return to normal life by going out, taking vacations, pursuing leisure and entertainment opportunities, and resuming typical spending and travel patterns.

Many more companies are talking about having workers return to their offices (albeit on a reduced on-premises schedule for most). That comes as a relief to major metro downtowns that have been suffering from a lack of warm bodies during the work-from-home era.

Where Do We Go From Here?

According to NPR, only 1 out of 3 jobs lost during the pandemic has been regained. They assert that total employment is still 15 million jobs down from pre-pandemic levels in February 2020. Unemployment for black and Hispanic women still remain much higher than those for other demographic groups, and the average rates for the whole labor force.

Despite improvements in June for this cohort, a recent surge in coronavirus infections in some states suggests that the June report may overstate actual job growth. The afore-linked "Planet Money" podcast makes for fascinating listening, and suggests that signs of growth and weakness exist side-by-side in the labor market.

June also saw 7.5 million people get laid off ("growth" is typically the total number or hirings less the total number of firings/layoffs), and 2.9 million "permanent job losers" (those who do not expect to be rehired into their old jobs again, ever). Thus, NPR suggests that many jobs being lost right now will not be coming back.

Essentially, that gives the workforce more losses to make up, and that such losses will have to be recovered through career changes and transitions into different markets and industries.

To me, these analyses make upcoming job growth both more interesting and little more fraught with peril and resistance than I had previously thought. If the labor market can keep growing, it will have to involve dislocations of various sorts for workers needing to find new venues and industries in which to work, because their old jobs are gone forever.

This should make watching the next few reports even more interesting than usual.