The Washington PostDemocracy Dies in Darkness

U.S. economy added 850,000 jobs in June as labor market showed renewed strength

Hiring surged heading into the second half of the year

Passengers wait in a security check-in line at O'Hare International Airport in Chicago on Thursday. AAA estimates that travel for the Fourth of July holiday will increase by 40 percent compared with last year. (Shafkat Anowar/AP)

The U.S. economy added 850,000 jobs in June as the pace of the recovery surged — quieting fears, at least temporarily, of more lasting harm from labor and supply shortages.

The unemployment rate changed little, ticking up to 5.9 percent from 5.8 percent.

The news is likely to be seen as a good sign for the economy more than one year into the pandemic, after numerous wrinkles have emerged to complicate a labor recovery many hoped would be faster at this level of vaccinations. It was the largest number of jobs added in a month since last August, during the early months of the labor market’s recovery.

“It’s a pretty strong report,” said Kate Bahn, an economist at the Washington Center for Equitable Growth. “This overshot expectations. And the job growth was in the industries that had been so hard-hit. This is pointing to signs that we’re growing back exactly where we need to be growing back.”

Employment jumped in the leisure and hospitality sector, with 343,000 jobs added, more than half in restaurants and bars. Hotels and other accommodations added about 75,000 jobs, as did arts, entertainment and recreation entities.

In local and state government education, employment increased by 230,000.

Retail added 67,000 jobs, with strong growth in clothing and merchandise stores.

Average earnings, too, continued to increase, climbing 10 cents for all employees to $30.40 an hour, following larger increases in May and April. The Bureau of Labor Statistics said the rising wages reflect higher demand for labor at this stage of the recovery.

In the leisure and hospitality sector, an often low-wage industry that has been a focal point of the debate about a labor shortage, wages for nonsupervisory workers rose markedly for the quarter, according to Diane Swonk, chief economist at Grant Thornton — up 87 cents an hour since April, the largest quarterly increase in the history of the data. Since January, those wages are up about $1.55, she said.

“It’s pretty stunning,” she said.

‘The final straw’: How the pandemic pushed restaurant workers over the edge

Job growth in April, revised down to 269,000, and May, revised up to 583,000, while not anemic, fell well below the hopes that more than 1 million jobs could be added per month in the spring. Republicans tried to seize on those reports to suggest that President Biden’s economic agenda was falling short.

But June’s report blew through projections, surpassing analysts’ estimates that about 700,000 jobs would be added in the month. Still, the economy remains down 6.8 million jobs from where it was in February 2020.

Drew Matus, chief market strategist for MetLife Investment Management, said he was concerned about the increase in unemployment, which comes from a separate survey than the figure for jobs added.

“A lot of the employment gain, let’s call it a quarter, was in state and local government education hiring,” he said. “Could be seasonal that pushed the headline number higher.”

The labor force participation rate ticked up nominally for men and women over age 20 but declined for teenagers, and overall it remains significantly lower than it was before the pandemic.

The economy isn't going back to February 2020. Fundamental shifts have occurred.

Modest job declines in motor vehicle manufacturing, of about 12,000, and construction, of about 7,000, could be a sign that material shortages continue to plague some sectors of the economy, Matus said.

Supply chain issues have been affecting those industries — microchips for vehicle-makers, lumber for builders — helping to drive up prices and complicate the recovery as consumer demand and activity rebound. And inflation remains a concern of top policymakers in Washington, after more than a year of low interest rates and stimulus measures helped fire up the economy.

Economists have looked to the leisure and hospitality sector — still down more than 2 million jobs from before the pandemic — for signs of a reawakening jobs market, as caseloads remain low and vaccination rates continue to crawl upward.

There are other positive signs, too.

Air travel has climbed significantly in recent months, and the Fourth of July weekend is expected to continue the trend. According to an estimate by AAA, travel for the holiday is expected to increase by 40 percent compared with last year and nearly reach pre-pandemic levels, with an estimated 47.7 million people traveling.

Consumer spending on services like restaurants, entertainment and transportation has been increasing in recent months. And the stock market has continued to boom, closing out the first half of the year at record highs. The Congressional Budget Office is now forecasting an unemployment rate of just 3.6 percent by the end of 2022, adjusting the figure downward amid the economy’s expansion.

Concerns about a labor shortage — and the role that extra unemployment benefits may play in discouraging people from returning to work — have consumed the political debate in recent months, but economists have pointed to another factor they say probably plays a larger role: the fact that many schools had not fully reopened by the end of the academic calendar this spring.

But many are forecasting even stronger months of growth in the fall after schools completely reopen, allowing many parents who have dropped out of the labor force to care for children to return to work.

Though it has slowed, the vaccination rate has continued to increase, and economists said the continued return to what were once quotidian pastimes — shopping at a mall, going to a concert, eating at a restaurant — should continue to stoke growth in the labor market.

“You have excess savings and pent-up demand, which will result in higher demand for labor, as we utilize more in-person services,” said Odeta Kushi, an economist at First American Financial Corporation.

According to surveys by the National Federation of Independent Business, 46 percent of small businesses say they are having trouble filling open positions, down slightly from May but well above the 48-year average of about 22 percent.