US employment likely accelerated in June as companies boost perks
WASHINGTON (Reuters) – US job growth likely picked up in June as companies, desperate to boost production and services amid booming demand, raised wages and offered incentives to lure millions of reluctant unemployed Americans back into the labor force.
The Labor Department’s closely watched employment report on Friday is likely to show that the economy closed the second quarter with strong growth momentum following a reopening made possible by vaccination against COVID-19. More than 150 million people are fully vaccinated, leading to pandemic restrictions on business and mask requirements being lifted.
Despite the expected acceleration in new hires, job gains would likely still be below the millions or more per month that economists and others had projected earlier in the year.
“There are jobs but no workers,” says Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles.
The minimum wage workers will accept has risen significantly since the beginning of the pandemic, he said, “and many workers have an inflated idea of what their skills are worth and are therefore unwilling to return to work at the current wage.
According to a Reuters poll of economists, the number of non-farm workers likely rose 700,000 last month, after rising 559,000 in May. That would be more than the 540,000 monthly average for the past three months. Still, employment would be around 6.9 million jobs below its February 2020 peak.
Estimates ranged from 376,000 to 1.05 million. The unemployment rate is expected to fall from 5.8% in May to 5.7%. The unemployment rate has been underestimated by people who mistakenly classify themselves as “employed but not at work”. There is a record 9.3 million vacancies.
Politicians, corporations, and some economists have blamed increased unemployment benefits, including a $ 300 weekly government check, for the labor shortage. The lack of affordable childcare and fears of contracting the coronavirus have also been blamed for keeping workers, mostly women, at home.
In addition, there were pandemic-related retirements and career changes. Economists generally expect labor shortages to subside in the fall when schools reopen and government-funded unemployment benefits go away, but beware, many unemployed are likely to never go back to work. Record high share prices and rising home values have also favored early retirement.
“The labor shortage could be less of a burden from September, but there is no guarantee as more than 2 million people may have taken early retirement last year,” said James Knightley, chief international economist at ING in New York.
SWEET OFFER
Indeed, according to the Indeed job search engine, 4.1% of job postings were advertised with incentives in the seven days ending June 18, more than double the 1.8% in the week ending July 1, 2020. Incentives, the signing, retention, or one-time cash payments on hire, which ranged from $ 100 to $ 30,000 for the month ended June 18.
Some restaurant jobs pay up to $ 27 an hour plus tips, according to publications on Poachedjobs.com, a national job board for the restaurant / hospitality industry. The federal minimum wage is $ 7.25 an hour, but is higher in some states.
“The fact is, the competition for talent is going to be brutal,” said Ron Hetrick, director of staffing products at Emsi, a job data company in Moscow, Idaho. “Companies can no longer assume that there will be enough people to walk around.”
Average hourly wages are projected to rise 0.4% last month after rising 0.5% in May. This would mean a year-on-year wage increase from 2.0% in May to 3.7%. Annual wage growth is partly flattered by so-called base effects after a sharp drop in income last June.
With employment unlikely to return to pre-pandemic levels until 2022, rising wages shouldn’t worry Federal Reserve officials even if inflation warms due to supply shortages. Fed Chairman Jerome Powell has repeatedly stated that he expects high inflation to be temporary.
“Wage growth is likely to pick up somewhat, but not enough to really change what we already know about inflation in the coming months,” said James McCann, assistant chief economist, Aberdeen Standard Investments. “What the data could do is solidify investor thinking about when the Fed might announce a slowdown in asset purchases.”
The US Federal Reserve started talks last month on how to end its massive crisis-era bond purchases. Continue reading
In line with recent trends, the June job increase was likely led by the leisure and hospitality industries. Employment in manufacturing has likely increased, although increases have likely been curbed by rampant labor shortages. The Procurement Management Institute reported Thursday that its level of factory employment fell for the first time in seven months in June. Continue reading
The number of people employed in construction is likely to have rebounded after falling in May. The sector is supported by robust housing demand, although expensive lumber is a hindrance to housing construction.
Employment in the state has likely risen sharply, driven by state and local education. The number of layoffs at the end of the school year was probably lower than in the previous year. This should boost the seasonally adjusted payroll in education.
The average work week is likely a high 34.9 hours
Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci
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