Moneybox

The Jobs Report Just Gave Us One More Reason to Feel Good About the Economy

LOS ANGELES, CALIFORNIA - JUNE 23: A 'Now Hiring' sign is displayed at a fast food chain on June 23, 2021 in Los Angeles, California. Nearly 650,000 retail workers gave notice in April, the biggest one-month worker exodus in the retail industry in more than 20 years, amid a strengthening job market.  (Photo by Mario Tama/Getty Images)
That’s what we like to see. Mario Tama/Getty Images

The other day, I wrote a long list of reasons to be optimistic about the economy now that the U.S. is (fingers crossed) nearing the end stages of the coronavirus crisis. And hey, wouldn’t you know it, on Friday morning we were treated to a pretty solid jobs report that suggests the labor market might be picking up steam again after its spring lull. U.S. employers beat expectations by adding 850,000 workers to their payrolls, up 267,000 from May and the highest total since August 2020.

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Economy
Federal Reserve Bank of St. Louis
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Unfortunately, part of June’s bounce might be a statistical illusion. A large share of the month’s gains came from hiring at public schools, which alone added 155,000 employees. But that number could be an artifact of how the data is adjusted to reflect seasonal fluctuations in employment. As the New York Times explains: “There is normally a large drop in the number of teachers when schools let out for the summer. Accounting for that traditional decline may be complicated by the fact that not as many educators were working because of pandemic-related school closings.”

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But setting that aside, even if you just look at the hiring activity in the private sector, June offered plenty of reason to feel upbeat. Businesses and nonprofits tacked on 662,000 jobs, on par with what the economy was adding in February and March before its slowdown in April.

Jerbs
Federal Reserve Bank of St. Louis
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What else does this report tell us, other than that the job market is recovering some momentum? Not a ton, unfortunately. For the past few months, the highest stakes argument over the economy has been about whether pandemic unemployment insurance programs are making it harder for businesses to hire. Twenty-five states have either withdrawn from those federal programs early, or intend to in order to push their residents back to work (there were 26 until Indiana’s plans were shot down by a judge). This is the first report where we’d expect to see the impact of those moves, but it’s kind of hard to discern anything, particularly because we don’t have any state-by-state numbers.

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Take leisure and hospitality, which have been at the center of the unemployment benefit debate. This month, the sector added 343,000 employees, and accounted for more than half of all private-sector gains. This was the third straight month restaurants, bars, hotels, casinos, theme parks, and other entertainment venues added more than 300,000 workers, and in general, it has been adding workers at a much faster pace than midwage industries like manufacturing, where you wouldn’t expect jobless benefits to affect hiring as much. This, to some, suggests that UI isn’t really the thing making life tough for restaurant owners (I’ve made versions of this point before). But you could just as easily argue that we should expect the hospitality industry to be hiring faster, because its initial job losses were so much deeper than other sectors during the pandemic.

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Employment by industry
Federal Reserve Bank of St. Louis

Or consider the rate at which Americans are leaving unemployment and taking jobs. In recent months, they’ve been doing so at a much slower pace than you’d expect based on the number of job openings, which suggests something—whether it’s UI or child care or pandemic fears—is holding them back. And in June, they fell even further behind the curve, as Harvard economist Jason Furman pointed out this morning.

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One way to look at this is that employers, for whatever reason, are still having a difficult time hiring. Another is that dozens of states threatening to kick people off UI doesn’t seem to have helped the national picture much.

All of which is to say, things are headed in a good direction. I wouldn’t quite do a wolf howl about how the economy is back and ready to roll. And the numbers probably don’t prove anyone’s pet theory about what’s going on in the labor market, at the moment. But they’re a happy sign of progress.

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