Economists expect robust job growth to continue
After a slowdown in spring, the US labor market recovery is on pace to return to its pre-COVID employment peak by February 2022.
The US Department of Labor’s jobs report revealed that employers added 850,000 jobs in June – an acceleration from May’s 583,000 job gain.
With the robust employment growth in June, First American deputy chief economist Odeta Kushi (pictured) told MPA, the US economy had been able to recoup about 70% of the jobs lost at the start of the pandemic.
However, despite the latest employment growth, the economy is still 6.8 million jobs short of where it was in February 2020, and the unemployment rate was little changed at 5.9%. The prime-age labor force participation rate also edged up slightly to 81.7% last month.
“For context, the prime-age LFPR fell in the aftermath of the Great Recession, and it took a decade to return to the pre-Great Recession average (2001- 2007) of 83%,” Kushi said. “More progress is needed.”
Doug Duncan, chief economist at Fannie Mae, commented that one of the reasons why labor force participation has been slow to recover to its pre-pandemic level is because many Americans are still hesitant to return to the workforce for various reasons.
“However, the number of persons who voluntarily quit their jobs increased by 164,000 in June, the largest increase in this category since last September, a strong signal of the labor market recovery,” he said.
Another positive sign, Duncan explained, is a drop in the number of persons working part-time but who would prefer full-time employment. The number of part-time workers fell by 644,000, suggesting that they may now have full-time jobs. The June jobs report also showed that many businesses also raised pay due to the severe shortages in some segments of the job market.
“Average hourly earnings grew at a vigorous 3.6% year-over-year pace, which we believe could exacerbate pricing pressures currently present in the economy,” Duncan said. “Finally, we note that residential construction employment (including specialty trade contractors) rose by 15,200 last month, a more robust pace than in recent months, and a welcome sign for a sector facing severe supply constraints.”
Kushi added that construction employment was crucial in speeding up the pace of housing starts and increasing the housing stock.
“While residential building construction employment has steadily increased and even outpaced its pre-COVID level, overall construction employment is still 3.1% below its February 2020 level,” she said. “Attracting skilled labor remains a key priority for construction firms in months to come. Also important to note that employment for remodelers increased by 12,700 this month. Overall, a strong report for residential construction. More hammers, more homes.”
There were also notable job gains in leisure and hospitality (+343,000), public and private education (+114,000), professional and business services (+72,000), retail trade (+67,000 jobs), and other sectors.
“As expected, gains were concentrated in the service-providing segment, which added 642,000 jobs, and in the leisure and hospitality sector, with 343,000 jobs gained, both welcome signs for the segments of the economy hit hardest by the pandemic,” Duncan said. “One caveat to the strong job growth seen in this report is that some gains may have been overstated due to a distorted seasonal pattern; in particular, the 268,300 jobs added across the state, local, and private education sectors, which were likely affected by an abnormal seasonal pattern of returning to in-person education.”
“The economy is certainly headed in the right direction,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “The country’s reopening is challenged by supply chain constraints and worker shortages in certain sectors, but we expect robust job growth to continue.”
