U.S. Job Growth Surges Most in Ten Months

Non-farm payroll growth accelerated in June, increasing by 850,000 new jobs, its highest monthly gain since last August. 

Most estimates called for an increase of 720,000 new jobs for the month. Firms are displaying greater success in recruiting workers to keep pace with the demands from the broadening of economic activity. In another positive sign for U.S. employment, May’s non-farm payrolls were revised up to a 583,000 gain from its previously reported increase of 559,000. 

Interestingly, the unemployment rate edged up to 5.9% as some are choosing to retire while many workers are voluntarily leaving positions for better available opportunities and the number of job seekers rose. 

Stocks rose, the U.S. dollar slipped, and interest rates were little changed following this positive report from the U.S. Labor Department. 

Demand for labor remains strong as firms struggle to keep pace with broader economic growth, fueled by the lifting of restrictions on business and social activities, continued gains in vaccinations, and trillions of dollars in fiscal aid. 

At the same time, a limited supply of labor continues to beleaguer employers, with the number of Americans on payrolls still well below pre-pandemic levels. Coronavirus concerns (particularly with the new Delta variant), childcare, and expanded unemployment benefits are all contributing to the frustrating number of unfilled positions. Payrolls are still at 6.76 million below their pre-pandemic level, highlighting how far the labor market is from fully recovering. Nevertheless, these holdbacks continue to ease and will support continued strong growth in the coming months. This forecast was supported by the comments made by Federal Reserve Chaiman Jerome Powell at his recent Congressional testimony. 

Wage growth is picking up as companies are raising compensation to attract workers. The June jobs report showed a 2.3% month-over-month increase in average hourly earnings in the leisure and hospitality industry that accounted for 343,000 additional new jobs in June. Overall, average hourly earnings rose 0.3% last month. 

Inflation concerns combined with a steady employment reports may influence how soon the Fed tightens its current easy monetary policy. The most speculated initial tightening action would be to cut back, or taper, its consistent monthly asset purchase support of mortgage-backed (“MBS”) and U.S. Treasury securities. Pulling back on MBS purchases is likely to be the Fed’s first move.