Employers added 850,000 jobs in June, well above expectations, the Bureau of Labor Statistics reported Friday.
That compares to 559,000 jobs in May and forecasts of a 700,000 increase.
The unemployment rate, meanwhile, was slightly changed at 5.9%, up from its 5.8% rate in May.
The strongest gains came in leisure and hospitality, along with educational services, retail and professional services.
The report was the third reading of the job market this week. Earlier, private payroll firm ADP said employers added 692,000 jobs and the Labor Department reported that first-time claims for unemployment were 364,000 last week – a new pandemic low – after rising above 400,000 for the two prior weeks.
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The positive news comes as the job market continues to recover from its pandemic depths, albeit somewhat unevenly. One constraint to faster growth is that employers are finding it difficult to hire workers, with the reasons cited being health fears related to COVID-19, lack of available child care, wages that are not attractive and a large retirement of baby boomers in 2020.
“Employers are hiring in the face of worsening labor shortages and a more competitive talent acquisition market than ever,” says Nate Smith, CEO of Lever, which helps companies find workers. “Right as they look to expand their business and recover from the COVID-19 pandemic, employers are experiencing “The Great Resignation,” with a record breaking 4 million workers quitting their jobs in April.”
While job gains have been averaging around 500,000 a month for the past three months, “There are still 7.6 million fewer jobs relative to pre-pandemic levels, so we still have a ways to go,” says Rhea Thomas, senior economist at Wilmington Trust.
“We may have to wait until the fall, however, to get a clearer picture of whether labor supply constraints are easing,” Thomas adds, noting that by then the $300-a-week enhanced unemployment benefits will have ended and schools should be mostly reopened in-person.
Getting the labor market back to something resembling its pre-pandemic state may take until 2022 or even 2023, some economists believe, and it is an important consideration for the Federal Reserve Board as to when it begins reducing its $120-billion per month purchase of Treasury bonds and mortgage securities it initiated back at the start of the pandemic.
With rising vaccination rates, more child care options available now that summer is here, and the enhanced unemployment benefits ending early in 25 states, “job growth is now all about volume,” says Drew Matus, chief market strategist at MetLife Investment Management.
Although inflation has risen sharply of late, there are indications it may be ebbing and the bond market seems to believe the Fed’s statements that it is “transitory.”
Future prices for lumber, a key material in housing, have fallen to $710 per thousand board feet – down from a record $1,670 reached in early May. Yields on the 10-year Treasury note are around 1.5%, having fallen significantly since their highs in March.
“It’s quite possible that the change in direction of interest rates presages a forthcoming peak in macroeconomic momentum,” Matthew Nest, global head of macro strategies at State Street Global Advisors says, adding that while the economy will continue to do well the rate of growth will slow from levels seen in the first six months.”
“I do believe sequentially the second quarter is likely to be the peak of annualized growth,” he says.
“There’s a lot of positive economic momentum created by increased vaccination and reopening efforts,” says Steve Rick, chief economist at CUNA Mutual Group. “While it’s essential that deep, systemic inequalities are addressed along the way, the future looks bright. With continued improvements, I anticipate unemployment will continue to fall to around 5% by the end of 2021 as we progress towards full employment, which I predict will be 4.5% unemployment around the summer of 2022.”