June saw a strong acceleration in the pace of recovery in the job market. Total nonfarm payroll employment in the US rose by 850,000 according to the US Bureau of Labor Statistics, and more than 1.7 million jobs have been gained in the last three months. Since the worst of the decline in April 2020, US employment has risen by 15.6 million. Nonetheless, it remains 6.8 million (4.4%) below the peak in February 2020.
A major driver of hiring has been the reopening of restaurants, bars, and entertainment venues and the resumption of travel. Employment in leisure and hospitality increased by 343,000, with more than half of the gain in food services and drinking places (194,000). Accommodations jobs were up 75,000; arts, entertainment, and recreation added 74,000. The recent recovery has occurred very rapidly and efficiently. However, some restrictions remain in various areas, and employment in leisure and hospitality is still down 2.2 million from pre-pandemic levels.
Even with the strong uptick, both the unemployment rate (5.9%) and the number of unemployed persons (9.5 million) held fairly steady. This fact isn’t, however, a cause for major concern. Instead, it reflects the effects of an increase in the labor force as people are being encouraged to jump back into the market. The number of people indicating they couldn’t look for work due to the pandemic dropped from 2.5 million in May to 1.6 million in June. Weekly initial claims for unemployment have also plummeted in recent months and are rapidly outpaced by hiring. Both the rate and number of people unemployed are well below highs reached last spring, though they’re substantially above rates prior to COVID-19 (3.5% and 5.7 million).
Moreover, as business picks up, workers are transitioning back to full-time hours. The number of persons employed part time for economic reasons (meaning they’d rather have a full-time job) decreased by 644,000 to 4.6 million. Wages are also rising as companies compete for employees.
The not so good news is that about 42% (4.0 million people) of the total unemployed have been out of work for 27 weeks or more. That’s not surprising given the severity of the downturn, but long-term unemployment is often devastating to individual and household finances. Simultaneously, labor shortages are worsening in some industries, which could somewhat diminish future growth.
As I stated last March, this recession was not caused by a structural problem (the normal case). Consequently, the economy could not fully recover until we conquered the virus but could surge quickly thereafter. We are now seeing that pattern unfold. Assuming we avoid spikes in severe cases, there is every reason to expect growth to continue (although the pace will likely be uneven). Bring on the jobs! Stay safe!!