Biden administration extends student loan payment hiatus.
The US economy roared in midsummer with a surge in hiring, overcoming difficulties in matching workers with openings, as the recovery appeared to be taking hold more firmly.
Employers created 943,000 jobs in July, the Labor Department reported on Friday, with restaurants and bars in the lead. It was the best monthly performance in almost a year, and it was accompanied by a sharp drop in the unemployment rate to 5.4%, the lowest since the start of the pandemic, from 5%. 9%.
A cloud hung over the dynamic numbers: Data was collected in the first half of last month, before the Delta variant of the coronavirus exploded in many parts of the country. Experts warn that a sustained outbreak could pose a threat to industries that have just recovered.
Nonetheless, after sizable employment gains in May and June, July’s results reinforced the fact that the recovery is continuing, aided by healthy consumer spending, trillions of dollars in government support and a resumption of economic growth. business investment.
“This is an unambiguously positive report,” said Michael Gapen, chief US economist at Barclays. “Labor market conditions are strong. Unemployment benefits, infection risks and childcare constraints do not prevent strong recruitment. “
For the Federal Reserve, July data is likely to increase confidence that the economy is on a solid track.
The Fed has kept interest rates close to zero since March 2020 and buys bonds every month, policies to keep short and long-term interest rates low and to fuel borrowing and spending. The job gains will give the central bank more confidence that the economy is doing well, keeping it on track to announce a plan to slow bond buying in the coming months.
In a speech from the White House, President Biden welcomed the report as a reflection that his policies, too, were having a crucial impact, including efforts to encourage workers to get vaccinated against the coronavirus.
“We will undoubtedly have ups and downs along the way as we continue to fight the Delta wave of Covid,” Mr Biden said. “What is indisputable now is this: The Biden Plan is working, the Biden Plan is producing results, and the Biden Plan is moving the country forward.”
With upward revisions to the figures for May and June, nearly 2.5 million jobs have been created in the past three months, putting the economy three-quarters of the way towards restoring 22.4 million. positions cut at the start of the pandemic.
“The business is amazing,” said Tom Gimbel, managing director of LaSalle Network, a recruiting and staffing company in Chicago. “It shows me that companies are very optimistic. “
Leisure and hospitality businesses, which were devastated last year by the closure of bars and restaurants, were the biggest contributors to July’s hires, adding 380,000 to their payrolls. This included 253,000 positions in catering establishments, as well as jobs in accommodation and in the arts, entertainment and recreation.
Exceptionally for a summer month, July also produced a substantial increase in education work. Instead of letting teachers go like in the past, schools kept more workers on the payroll, increasing the seasonally adjusted numbers.
Local governments created 221,000 education jobs, after a jump in June, and private institutions added 40,000.
Manufacturing and construction posted smaller increases, hampered by higher prices for goods and a shortage of components like semiconductors. Jobs in retail edged down after two months of strong gains. But employment in professional and business services jumped by 60,000, a sign that the white-collar industry is on the rise.
“Companies continue to hire salespeople in numbers that I have never seen before,” said Mr. Gimbel of LaSalle Network. “The huge demand is for entry to the middle level, with salaries ranging from $ 45,000 to $ 90,000. It is the rebirth of the middle manager.
For much of the year, companies reported difficulty filling vacancies as they tried to meet consumer demand and replenish their workforce – an anomaly in a labor market still far from full employment. .
“You have to make twice as many calls to find candidates,” said Carmen Smith, director of human resources at Coyote Logistics, a UPS subsidiary in Chicago. “The talent market is very tight.
The July report, however, offered signs that some workers were stepping off the sidelines.
Among those of working age years, which are defined as 25 to 54, the participation rate of the workforce – those working or looking for work – fell from 81.7% to 81.8%. The Fed is hoping to see this figure rise to its February 2020 level, which was 82.9%.
Ms Smith said Coyote recruited 100 new employees in July and plans to add 300 later this year, mainly in sales, operations, marketing and finance. “We are entering our busiest season and business looks strong,” she added.
One of the factors in the resumption of hiring in the country could be more attractive salaries. Average hourly earnings rose 4% in July from a year earlier, and wages for non-supervisory and production workers – which may give a clearer picture of what’s going on for typical workers – have climbed 4.7% over the past year.
These numbers have been skewed by who has returned to the job market or not, but they point in the right direction, from the Fed’s perspective.
At the same time, there is a controversial debate over whether the safety net put in place to help unemployed workers get through the pandemic could now keep them out of the job market. Twenty-six states, all led by Republicans except one, have decided to end a $ 300-per-week supplement to federal unemployment benefits before it expires in September.
There is little evidence in the data available so far that the threshold has significantly expanded the pool of job applicants. But Salman Chaudhry, general manager of five vacation homes in Ocean Springs, Mississippi, said the early elimination of the federal supplement in his state in June, along with higher wages, had attracted job seekers.
“Our number of applications has increased,” he said. “We have found more people who are ready to work now.”
For Mr. Chaudhry and other business owners, the biggest wild card now is the Delta variant. “We will wait and see what Delta does to our business, but at this time we still haven’t seen the effects,” Chaudhry said. “We’ve had a few cancellations, but not at the level where Covid first hit. “
At national scale, the occupancy rate of hotels seems to have fallen slightly in recent weeks, according to STR, an industry analysis company. And Chase card spending in some travel and entertainment categories has plummeted, Jesse Edgerton and Peter B. McCrory, economists for JP Morgan, wrote on Friday.
“Most notably, airline spending has fallen nearly 20% from a recent peak in mid-July, a larger drop than during the severe winter Covid wave,” the economists wrote. “On the other hand, catering spending has softened only modestly and so far much less than during the winter wave. “
There is turbulence on the horizon. Events including the New York International Auto Show, which was due to open later this month in Manhattan, were recently canceled. Mask requirements have also been reintroduced indoors in many areas.
If meal restrictions returned or schools closed again, these areas would be hit hard. A slowdown in hiring of travelers is also likely if cases increase further.
“If Delta becomes a concern, it will likely limit spending and activity and potentially hiring in all of the same service areas,” said Mr. Gapen, the economist at Barclays. “This presents a downside risk. “
Profits returned to pre-pandemic levels at Poor Boy Lloyd’s restaurant in Baton Rouge, Louisiana, as downtown offices filled up again after a year of remote work, owner Fred Taylor said. In fact, Mr. Taylor was struggling to keep up with the resurgence of clientele while being short-staffed.
But over the past week, he said, it had lost nearly 75% of its usual sales as cases of Delta variants increased in the region.
Uncertainty over how the virus will progress makes it difficult to know how much to invest in hiring and training more workers, Taylor said.
“It’s hard to operate on fluctuating income,” he said. “The costs are going to be higher. The electricity is going to be the same, the rent is going to be the same, and you don’t have the money to pay it.
Jeanne Smialek, Coral Murphy Marcos and Katie rogers contributed reports.