Bloomberg – U.S. employers added the most jobs in nearly a year and the unemployment rate declined faster than forecast, showing the labor market is making more robust gains toward a full recovery as the economy strengthens.
Payrolls climbed by 943,000 last month after an upwardly revised 938,000 increase in June, a Labor Department report showed Friday. The median estimate in a Bloomberg survey of economists called for a 870,000 gain. The unemployment rate dropped to 5.4%.
Government payrolls added 240,000 jobs to the headline figure. Private payrolls posted a solid gain as well. The dollar extended gains against all of its Group-of-10 currency peers after the release, and 10-year Treasury yields advanced. Stock futures also rose.
A resurgence in economic activity has sparked a surge in labor demand — particularly in the leisure and hospitality industry — since the beginning of the year. At the same time, payrolls remain 5.7 million short of pre-pandemic levels and many employers have struggled to fill a record number of vacant positions.
The figures mark another step toward the Federal Reserve’s goal of “substantial” further progress in the labor market recovery. Fed officials including Chair Jerome Powell and Governor Lael Brainard have indicated the labor-market recovery had some way to go before the central bank could begin tapering asset purchases.
Fed Governor Christopher Waller said this week that if the next two monthly employment reports show continued gains, he could back such a move.
The data offer validation for President Joe Biden’s efforts this year to approve almost $2 trillion in pandemic relief and widely distribute vaccines, amid signs that employers were having difficulty finding workers.
At the same time, a stronger labor recovery could spur lawmakers to pare back Biden’s long-term proposal for trillions of dollars toward child care, education and other social measures.
Overall job growth in July was bolstered by a 221,000 seasonally adjusted gain in local education payrolls. The government attempts to smooth out the school-related dismissals that occur during the summer months. Because of smaller staffing levels this spring, the adjustment resulted in a larger July gain.
Friday’s figures showed a 703,000 increase in private payrolls, which was led by leisure and hospitality, which jumped by 380,000.
Other notable gains were in health services, transportation and warehousing, and business services.
The labor force participation rate — a measure of the share of Americans who are employed or looking for work — edged up to 61.7% in July. Companies say they’re having trouble recruiting workers because of ongoing fears of catching the virus, child care responsibilities and generous unemployment benefits, all of which could be holding back the participation rate.
In an effort to encourage unemployed Americans to look for work, roughly half of U.S. governors have ended federal unemployment benefit programs created during the pandemic before their official expiry in September.
Employers including Amazon.com Inc. and McDonald’s Corp., meanwhile, have been increasing wages and offering signing bonuses to lure workers. Average hourly earnings increased by 0.4% in July for a second month, the report showed.
The coronavirus delta variant, which became more widespread at the end of July, could pose a risk to job growth in the coming months. Policy makers have begun introducing measures to curb the spread of the variant and prevent another round of shutdowns.
New York City will require proof of vaccination for workers and customers at indoor restaurants, gyms and entertainment venues, while the Centers for Disease Control and Prevention updated its guidance on indoor masking to include K-12 classrooms and vaccinated people who live in virus hot spots.
Digging Deeper
The U-6 rate, also known as the underemployment rate, dropped to 9.2%. The measure includes those who are employed part-time for economic reasons and those who have stopped looking for work because they are discouraged about their employment prospects
Employment-population ratio jumped to 58.4% in July from 58%
The unemployment rate for White Americans fell to 4.8%, while the rates for Black Americans dropped to 8.2% and Hispanic Americans declined to 6.6%
Average weekly hours held at 34.8
The participation rate for women age 25 to 54 — the group most likely to have children — rose to 75.5%; the rate among men in that age group climbed to 88.3%
The number of Americans classified as long-term unemployed, or those who have been unemployed for 27 weeks or more, declined by 560,000 in July — the biggest drop on record