This morning the Bureau of Labor Statistics reported that the United States economy added 850,000 jobs in June. Compared to recent months, this was an increase in the pace of hiring and exceeded expectations. However, the unemployment rate ticked up to 5.9% and has been relatively unchanged since March. The acceleration in job gains was a welcome change from the recent lull, but the relative stagnation of unemployment and the labor force suggests continuing supply-side strains in the labor market.
The more rapid pace of hiring is reflective of strong demand for workers across the economy. States continue to reopen and remove public health restrictions, which led to strong job gains particularly in the hardest-hit leisure and hospitality sector. At the same, household survey employment has been flat while labor force participation remains far below pre-pandemic levels, with 3.4 million fewer workers in the labor force than before the pandemic. Thus, even though payroll employment is still down 6.8 million from before the pandemic, jobs have become increasingly hard to fill. Job openings are at record levels and continue to rise, which has put upward pressure on wages and other compensation like starting bonuses.
The labor supply restrictions – whether from enhanced unemployment benefits, increased childcare responsibilities, or lingering health concerns – will likely weigh on the economy for at least until fall. Although a number of states have already ended the federal enhanced unemployment benefits, it is too soon to gauge the impact of these changes.
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Noah Williams is an adjunct fellow at the Manhattan Institute and the Juli Plant Grainger Professor of Economics and director of the Center for Research on the Wisconsin Economy at the University of Wisconsin–Madison.