US announces robust job growth and strong wage gains

A “Now Hiring” sign advertising car wash jobs is seen along a street in Miami, Florida, United States, May 8, 2020. REUTERS / Marco Bello / File Photo

  • The non-agricultural wage bill increases by 943,000 in July; June revised upwards
  • Unemployment rate drops to 5.4% from 5.9% in June
  • Average hourly gain of 0.4%

WASHINGTON, Aug.6 (Reuters) – Job growth in the United States accelerated and the unemployment rate fell in July on demand for workers in the labor-intensive service sector ‘work, reversing fears of a slowdown in hiring and suggesting that the economy has started the second half of the year with strong momentum.

The closely watched Labor Department’s employment report on Friday also showed solid wage gains, with employers vying for scarce workers and the unemployment rate falling to its lowest level in 16 months. The report follows news last week that the economy fully recovered in the second quarter from the large production loss suffered during the very brief pandemic recession.

Non-farm payrolls increased by 943,000 jobs last month after increasing 938,000 in June. Economists polled by Reuters predicted that the wage bill would increase by 870,000 jobs. Estimates ranged from 350,000 to 1.6 million. Employment is now 5.7 million jobs below its peak in February 2020.

The job gains have been partly flattered by seasonal job changes in schools caused by the COVID-19 pandemic.

“Labor market conditions appear to be healthy at the start of the third quarter as labor-intensive service companies continue to hire given strong pent-up demand,” said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.

Before the pandemic, employment in education normally fell by around 1 million jobs in July with the closure of schools, but this year many students are catching up after the disruption caused by the pandemic. This likely rattled the seasonal model or factors that the government uses to eliminate seasonal fluctuations in the data, thus increasing the payroll.

The government payroll increased by 240,000 jobs last month, while employment in local public education increased by 221,000. The Bureau of Labor Statistics of the Department of Labor, which compiles the employment report , said that “pandemic-related staff fluctuations in education have distorted normal seasonal accumulation and layoff patterns, likely contributing to job gains in July.”

Employment in the leisure and hospitality sector increased by 380,000 jobs, with wages in restaurants and bars increasing by 253,000. Hiring was also strong in professional and business services, transportation and warehousing, as well as in the healthcare sectors. Manufacturing payrolls increased by 27,000 jobs, while construction employment rebounded by 11,000 jobs.

The unemployment rate fell to 5.4%, its lowest level since March 2020, from 5.9% in June. The drop came even as 261,000 people entered the labor market, bringing the participation rate to 61.7% from 61.6 in June. The unemployment rate, however, continued to be underestimated by people mistakenly classifying themselves as “employed but absent from work”. Without this misclassification, the unemployment rate would have been 5.7% in July.

US stocks opened broadly higher after the report was released. The dollar was trading higher against a basket of currencies. US Treasury prices have fallen.


Economic growth this year is expected to be around 7%, which would be the fastest since 1984. The health of the labor market will weigh heavily on the Federal Reserve’s next monetary policy measures.

“Strong readings over the next two months seem likely to give the green light to a pre-announcement of a cut at the Fed’s September meeting,” said James McCann, deputy chief economist at Aberdeen Standard Investments in Boston.

But the surge in COVID-19 infections, driven by the Delta variant of the coronavirus, poses a risk. While major disruptions to economic activity are not expected, with nearly half of the population fully vaccinated, spiraling cases could keep workers at home and hamper hiring.

A shortage of workers has left employers unable to fill a record 9.2 million job vacancies. With workers scarce, employers continued to raise wages. Average hourly earnings rose 0.4% last month, led by low-wage industries, after a similar gain in June. This brought the year-on-year wage increase to 4.0% from 3.7% in June.

The lack of affordable child care and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There have also been retirements linked to the pandemic as well as career changes.

Republicans and business groups blamed improved unemployment benefits, including a $ 300 weekly payment from the federal government, for the labor shortage. Although more than 20 states led by Republican governors ended these federal benefits before they expired on September 6, there is little evidence that the layoffs have boosted hiring.

The labor shortage is expected to ease in the fall when schools reopen for in-person learning, but some economists are less optimistic, saying the economy was creating many low-skilled jobs and there were no enough people to take them.

“One of the biggest problems we have right now is that about two-thirds of our job openings are in the type of jobs that don’t require any type of college degree,” said Ron Hetrick, senior economist at work at Emsi Burning Glass in Moscow. , Idaho. “We have around 6 million job openings that don’t require a college degree, but we only have 3.4 million unemployed people who don’t have a college degree.”

Reporting by Lucia Mutikani; Editing by Dan Burns and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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