Economy adds robust 850K jobs in June, exceeding expectations

The U.S. added 850,000 jobs in June, exceeding expectations as rising demand for a wide range of services disrupted by the COVID-19 pandemic fueled the labor market, according to data released Friday by the Labor Department.

The unemployment rate ticked slightly higher to 5.9 percent, according to the report, but the monthly haul far exceeded the projections of economists, who expected the U.S. to gain roughly 700,000 jobs last month.

The labor force participation rate stayed roughly even at 61.6 percent, a sign that many Americans are still unable to return to the workforce. There were also 6.4 million Americans who did not seek a job in June — and therefore not counted as unemployed — but want to work, up from 5 million before the pandemic.

Even so, strong job gains in sectors hit hard by the pandemic and a sharp drop in the number of Americans working part-time when they’d prefer to work full time pointed toward an accelerating rebound from COVID-19.

“This strong labor market performance – despite persistent hiring strains – is likely the start of a series of stellar reports that will underpin the strongest US economic performance since 1951 this year,” said Lydia Boussour of Oxford Economics.

“While a combination of labor supply constraints – including the virus fear, unemployment benefits, child care issues and early retirements – is still constraining employment these headwinds should gradually ease in the coming months.”

The June jobs report may also help add clarity to the high-stakes political debate over the pace of the recovery.

The U.S. had added an average of 540,000 jobs each month between March and May, a solid but unspectacular pace for a country still down more than 7 million jobs from February 2020. Millions of Americans have also remained out of the labor force despite a record-breaking 9.3 million job openings as of April.

Republican lawmakers and some right-leaning economists have pinned the kinks in the labor market recovery — and rising inflation — on President Biden’s March extension of enhanced jobless aid programs. Twenty-six governors, almost all of them Republicans, pulled their states out of those programs as of June, meaning the effects won’t likely be apparent until July at the earliest.

The June jobs report, however, showed hard-hit sectors that struggled to hire workers earlier rebounding sharply as the number of Americans held back by the pandemic decreased. The number of Americans who said a COVID-19 related reason prevented them from looking for work dropped to 1.6 million in June, down 900,000 from 2.5 million in May.

“The June employment report showed an upshift in employment growth, nearly doubling the average job growth rate that has prevailed over the year, and it may mark an overall acceleration in the pace of hiring as viral and policy issues recede as potential labor supply constraint,” said Gordon Gray, director of fiscal policy at the American Action Forum, a right-leaning nonprofit.

The leisure and hospitality industry led the June jobs haul with a gain of 343,000, a promising sign for a sector devastated by the pandemic. Restaurants and bars added 194,000 of those jobs, followed by hotels with 75,000 and arts, entertainment and recreation with 74,000 new jobs.

Local government education added 155,000 jobs, but the Labor Department said those figures could be distorted by seasonal adjustments and the impact of the pandemic on public school hiring. 

Employment also rose in professional and business services (72,000), retail (67,000), and social assistance, where a gain of 32,000 jobs included 25,000 in child day care services. 

Even so, sharp increases in job growth in those sectors — where women make up the greatest proportion of workers — did little to bring more women into the labor market. Women’s labor force participation was still stuck at 56.2 percent, compared to 67.5 percent for men.

Unemployment rates also stayed largely even across racial lines, keeping the jobless rates for Black workers (9.2 percent) well above that of whites (5.2 percent).

“Many people who lost jobs at the start of the pandemic have been unemployed ever since. As jobs come back they will get work but there is still a big jobs deficit—labor demand is still the problem,” tweeted Heidi Shierholz, policy director at the Economic Policy Institute, a left-leaning think tank.

Updated at 9:49 a.m.