- Hiring picked up further in June, as nonfarm payrolls rose 850k jobs. That was above market expectations for a 711k gain. However, the unemployment rate ticked up to 5.9% from 5.8% in May in the household survey.
- The slight uptick in the unemployment rate was driven by a modest increase in the number of unemployed (+168k) in the household survey. Notably, the number of “job leavers”, i.e. quits, rose quite strongly on the month (+164k) as did the number of re-entrants to the labor force (+149k). However, the participation and employment-to-population ratio remained unchanged. It is not unusual for the household survey, which measures the unemployment rate, the payrolls number, which is from the establishment survey, to deviate in a given month. While June’s deviation is large, the magnitudes of these have increased since the pandemic, as labor market shifts have become more dramatic.
- As of June, nonfarm payroll employment was down by 6.8 million, or 4.4% from its pre-pandemic level in February 2020. On net, revisions to April and May added an additional 15k jobs.
- Once again, leisure and hospitality led the way on job gains, adding 343k positions. Over half of the job gains were in restaurants and bars, which added back 194k workers. Leisure and hospitality employment is still down 12.9%, or 2.2 million jobs, versus pre-pandemic levels. Public and private education also saw healthy gains as hiring improved in local government education (+155k), state government education (+75k) and private education (+39k). However, the typical seasonal pattern in education hiring has been thrown off by the pandemic, and the BLS cited that this likely contributed to the large gains in education in June.
- Healthy job gains were also seen in professional and business services (+72k), retail trade (+67k) and other services (+ 56k). Manufacturing employment was little changed in June (+15k) and the construction sector shed jobs (-7k), as losses in nonresidential construction outweighed gains in residential.
- Work life continues to normalize as the share of people teleworking fell to 14.4% in June, down from 16.6% in May. Among those not in the labor force, 1.6 million were prevented from looking for work due to the pandemic, down from 2.5 million in May.
Key Implications
- The labor market continues to improve as the economy re-opens. Even though the monthly tally was likely a bit inflated by the haywire seasonal patterns in education, June’s job report was very solid. Even the uptick in the unemployment rate is not overly concerning, given employees are confident enough of a strong job market to quit their jobs. That said, the lack of progress on labor force participation is somewhat disappointing.
- Looking ahead, we expect solid job gains through the third quarter, particularly as schools return to in-person learning. Most indicators suggest demand form employers in many sectors is strong, and once pandemic-related constraints on the ability to return to work ease, we expect unemployment to fall.
