The U.S. might have added 700,000 new jobs in June, but millions are still out of work

Did companies hire lots more people in June? Are many jobless Americans still not ready to return to work? And what’s the real unemployment rate?

Here’s what Wall Street is looking for in the U.S. employment report for June due out Friday morning.

700,000 new jobs

Economists polled by The Wall Street Journal predict the U.S. gained 706,000 new jobs last month. If so, it would be the biggest gain since March.

Most companies are eager to hire, especially in service-oriented businesses such as hotels, restaurants, vacation resorts, theaters and the like. Demand is surging as maskless Americans get out and about again.

The odds of a smaller employment gain are still quite high, however.

The number of people quitting their jobs recently hit a record, for one thing. There’s also been a big flush of retirements among older people who don’t want to risk their health.

Many companies have raised pay and benefits or offered other incentives to lure workers, but it’s unclear how much it’s helped. Generous unemployment benefits during the pandemic have allowed unemployed people to be more choosy about what jobs to take.

Read: U.S. unemployment claims sink to pandemic low of 364,000 as extra benefits start to get phased out

Unemployment rate

The percentage of unemployed people is expected to decline to 5.6% from 5.8%. Sounds good, but the real jobless rate is likely 2 to 3 points higher, economists and the Federal Reserve estimate.

How come? Millions of people who were working before the pandemic still aren’t working and they haven’t looked recently for a job, either. They aren’t counted in the unemployment rate.

Neither are some employees who tell the government they still have a job but no longer have a job to go back to — likely because the business closed.

Even taking those things into account, the unemployment rate has fallen a lot faster than anyone might have expected a year earlier when the pandemic was raging.

Read: U.S. manufacturers have all they business they can handle, but major shortages are a big headache

Labor force blues

A good way to judge the health of the labor market is by how many people either have a job or are looking for one. By that standard, the U.S. still has a long way to go.

Before the pandemic, the share of able-bodied people 16 or older who were in the labor force totaled 63.3%. It then fell to a 47-year low of 60.2% in the early days of the crisis after millions of people lost their jobs.

Yet the labor force has barely increased in the past year even as the economy has sharply improved. The rate of participation stood at 61.6% in May — the same as it was last October.

We’ll really know the jobs market and U.S. economy are fully back on track when millions rejoin the work force and the participation rate rises sharply.

“The U.S. economy has added some 14 million jobs since the labor market bottomed out in April of last year, but employment in May 2021 was still some 7.5 million below its pre-pandemic level,” noted chief economist Gus Faucher of PNC Financial Services.

Service-oriented jobs

After a year of sitting at home, Americans are flocking to vacation resorts, flying on planes again, going out to eat or taking in a ball game. They are doing all the things they couldn’t do during the pandemic.

That’s led to a huge surge in demand among these businesses to hire more people, but they haven’t been able to add employees as fast as they lost them last year.

It would be a good sign if there was another large increase in service-industry employment. Leisure and hospitality jobs have increased by an average of 315,000 a month since February, though they still remain 3.2 million below record precrisis levels.

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