US adds nearly 1 million more jobs
Demand heaviest in labour-intensive services sector
The recovering US economy added 943,000 new jobs in July, according to government data released on Friday, as hard-hit industries continued to return to normal.
The result was shy of the million jobs some economists had been expecting, but enough to push the unemployment rate down a half a point to 5.4%, the Labor Department reported.
Notable gains in hiring came in the leisure and hospitality sector as well as education, the report said.
Demand was heavy for workers in the labour-intensive services industry, suggesting the economy maintained its strong momentum at the start of the second half.
The July total was slightly higher than the 938,000 positions added in June.
Job gains were, however, flattered by shifts in seasonal employment at schools caused by the Covid-19 pandemic. Estimates ranged from as low as 350,000 to as high 1.6 million.
“Labour market conditions appear to be healthy at the start of third quarter as labour-intensive service businesses continue to hire given strong pent-up demand,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.
Prior to the pandemic, education employment normally declined by about 1 million jobs in July as schools closed, but this year many students are in summer school catching up after disruptions caused by the coronavirus. This likely threw off the model or seasonal factors that the government uses to strip out seasonal fluctuations from the data, giving payrolls a boost.
“Combined with the expansion of summer school programs in several large school districts across the country, the seasonal adjustment process provided another large boost to July education payrolls,” said Bullard.
The strong employment report followed on the heels of news last week that the economy fully recovered in the second quarter the sharp loss in output suffered during the very brief pandemic recession. Economic growth this year is seen around 7%, which would be the fastest since 1984.
The labour market’s health will weigh heavily on the Federal Reserve’s next monetary policy steps.
“Strong readings over the next couple of months seem likely to give the green light for a pre-announcement of tapering at the Fed’s September meeting,” said James McCann, deputy chief economist at Aberdeen Standard Investments in Boston.
But surging Covid infections, driven by the Delta variant of the coronavirus pose a risk. While major disruptions to economic activity are not expected, with nearly half of the population fully vaccinated, spiralling 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 openings. Lack of affordable childcare and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There have also been pandemic-related retirements as well as career changes.
The worker shortage is expected to ease in the fall when schools reopen for in-person learning, but some economists are less optimistic, arguing that the economy was creating many low-skilled jobs and there were not enough people to take them.
“One of the biggest problem we have right now is roughly two-thirds of our job openings are in the kind of jobs that do not require any type of a college degree,” said Ron Hetrick, senior labour economist with Emsi Burning Glass in Moscow, Idaho.
“We have about 6 million job openings that are not requiring a college degree, but we only have 3.4 million who are unemployed that don’t have a college degree.”