Hiring rose in July at its fastest pace in nearly a year despite fears over Covid-19’s delta variant and as companies struggled with a tight labor supply, the Labor Department reported Friday.
Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%, according to the department’s Bureau of Labor Statistics. The payroll increase was the best since August 2020.
Economists surveyed by Dow Jones had been looking for 845,000 new jobs and a headline jobless rate of 5.7%.
Average hourly earnings also increased more than expected, rising 0.4% for the month and are up 4% from the same period a year ago.
“The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the BLS said in the report, though it cautioned that the Covid impact is still skewing data and wage gains are uneven across industries.
Stock market futures reacted positively to the report, indicating a slightly positive open to trading Friday.
The drop in the headline unemployment rate looked even stronger considering that the labor force participation rate ticked up to 61.7%, tied for the highest level since the pandemic hit in March 2020. A separate calculation that includes discouraged workers and those holding jobs part-time for economic reasons fell even further, to 9.2% from 9.8% in June.
As has been the case for the past several months, leisure and hospitality led job creation, adding 380,000 positions for the month, of which 253,000 came in bars and restaurants. The sector took the hardest hit during the pandemic but has been showing consistent gains during the economic reopening.
Unemployment for leisure and hospitality tumbled to 9% in July from 10.9% in June and compared to 25% a year ago, though there are still about 1.8 million fewer workers than prior to the pandemic. Wages in the sector rose 1.2% month over month and are up 3.1% from a year ago.
Education also showed strong gains for the month, with 261,000 new hires. The BLS cautioned, however, that the pandemic has distorted the sector’s numbers and likely elevated the number for July.
That also left private payrolls up 703,000 for the month, about in line with expectations.
Professional and business services contributed 60,000 for the month, and transportation and warehousing added 50,000. Sectors also showing increases were other services (39,000), health care (37,000), manufacturing (27,000), information (24,000), financial activities (22,000) and mining (7,000). Retail posted a loss of 6,000 while construction and wholesale trade were flat.
The numbers come amid a rush of new coronavirus cases in the U.S. and around the world, with the most serious illnesses happening in areas with larger unvaccinated populations. The increase has raised fears that it could slow economic activity in a recovery that began in April 2020 and has shown resilience despite the periodic flareups of Covid cases.
At the same time, the U.S. is fighting a continuing battle with a scarcity of labor.
Job placement site Indeed estimated there were 9.8 million job openings as of July 16, far more than the 8.7 million considered unemployed. In a survey of 5,000 job seekers, however, the amount of those citing health concerns as a reason for not looking for a job declined, with a growing number citing a lack of need due to a financial cushion as the top response.
The unemployment rate has tumbled from pandemic high of 14.8% but remains well above the 3.5% before the crisis. Federal Reserve policymakers have vowed to keep ultra-easy monetary policy in place until it sees stronger signs of full employment, though Democrat Sen. Joe Manchin on Thursday criticized the central bank, saying it was risking runaway inflation in its jobs quest.
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