U.S. Adds 850,000 Jobs in June, a Sharp Rise
Daily Business Briefing
July 2, 2021, 2:37 p.m. ET
July 2, 2021, 2:37 p.m. ET
April
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–6.8 million since February 2020
152.5 million jobs in February 2020
Hiring leapt back up in June as employers added 850,000 workers, the government reported Friday. It was the strongest gain in 10 months and a fresh sign that the labor market’s recovery is gaining momentum.
The unemployment rate rose slightly, to 5.9 percent, the Labor Department said.
The report follows several promising economic developments this week. Consumer confidence, which surged in June, is at its highest point since the pandemic’s onset last year. Stocks closed out the first half of the year at record highs, and businesses’ plans for capital investments are rising. The Congressional Budget Office said Thursday that the economy was on track to recover all the jobs lost in the pandemic by the middle of next year.
“I think it’s a very solid and strong report and very encouraging that we’re seeing over the last few months continued increase in the net job creation,” said Kathy Bostjancic, chief U.S. financial economist for Oxford Economics. She noted that the totals fell below the one million mark that the Federal Reserve chair, Jerome H. Powell, has said he would like to see. Still, she added, “the momentum is moving in the right direction.”
At the moment, 6.8 million fewer jobs exist than before the pandemic. Millions of people have dropped out of the labor force, however, and “job openings far outnumber the applicants,” said Karen Fichuk, chief executive of the staffing company Randstad North America. “It is truly across the board right now.”
Aside from ever-present concerns about pay and benefits, workers are particularly interested in jobs that allow them to work remotely at least some of the time. According to a Randstad survey of more than 1,200 people, 54 percent say they prefer a flexible work arrangement that doesn’t require them to be on-site full time.
Health and safety concerns are also very much on the minds of workers whose jobs require face-to-face interactions, the survey found.
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“This is a trickier phase of the recovery,” said Sarah House, a senior economist with Wells Fargo. Last year, millions of workers were only temporarily laid off and able to slot back into their previous positions with little delay once reopening began.
Now, employers and workers are “having to make new matches and new connections, and that just takes more time,” she said.
Economists also point to a widespread reallocation of labor — like rounds of musical chairs on a mammoth scale — in which workers are re-evaluating their options. During the pandemic, many workers who had held restaurant and retail jobs may have taken positions in warehouses and manufacturing plants.
At the same time, the appetite for pandemic-driven jobs such as couriers and grocery store workers are ebbing as sectors like leisure and hospitality ramp up. A big chunk of June’s gains — 343,000 — were in that sector.
The education sector also showed a big pickup in hiring, although economists caution that seasonal adjustments could inflate the estimated gains. That is because there is normally a large drop in the number of teachers when schools let out for the summer. Accounting for that traditional decline may be complicated by the fact that not as many educators were working because of pandemic-related school closings.
Becky Frankiewicz, president of the staffing company ManpowerGroup North America, said that with so many employers in search of workers, “the core challenge now is enticing workers back to the work force.”
Governors in 26 states have moved to end distribution of federal pandemic-related jobless benefits even though they are funded until September, arguing that the assistance — including a $300 weekly supplement — was discouraging people from returning to work.
In states where benefits have already been cut off, though, recruiters have not seen a pickup in job searches or hiring. “I would have expected to see more people engage at a higher rate in the work force when the federal subsidies were ended,” Ms. Frankiewicz said. “We have not seen that correlation yet.”
The online job site Indeed surveyed 5,000 people in and out of the labor force and found that child care responsibilities, health concerns, vaccination rates and a financial cushion — from savings or public assistance — had all affected the number looking for work. Many employers are desperate to hire, but only 10 percent of workers surveyed said they were urgently seeking a job.
And even among that group, 20 percent said they didn’t want to take a position immediately.
Federal prosecutors have opened an inquiry into business matters at Lordstown Motors, the embattled electric truck manufacturer that was already being investigated by securities regulators and recently turned over its top management team, according to two people briefed on the matter.
It is not clear what issues the prosecutors, with the U.S. attorney’s office in Manhattan, are looking into. The investigation is in its early stages and began recently, said the people, who were not authorized to speak publicly.
In February, the Securities and Exchange Commission opened an investigation into claims that Lordstown had made about the number of orders from commercial buyers for its electric truck, which the Ohio company has said it expects to begin manufacturing and selling later this year.
The company had disclosed previously that it had received two subpoenas from the S.E.C. seeking information about those pre-order claims and some aspects of its merger last year with DiamondPeak Holdings, a special purpose acquisition company put together by David Hamamoto, a real estate investor.
The investigation by federal prosecutors was first reported on by The Wall Street Journal.
Representatives for the U.S. attorney’s office did not immediately respond to a request for comment.
In a statement, Lordstown said it was “committed to cooperating with any regulatory or governmental investigations and inquiries.” The company also said it was “looking forward to closing this chapter” so that its new leadership could focus on the production of its electric pickup truck, named Endurance.
In June, Lordstown’s founder and chief executive, Steve Burns, along with the company’s chief financial officer, resigned following the release of a report by the company’s board looking into Lordstown’s claims that it had nearly 100,000 pre-orders for it trucks. The report said Lordstown’s those claims “were, in certain respects, inaccurate.”
The board ordered the report after Hindenburg Research, an investment firm, issued its own report in March that focused on the pre-order claims and what it said were other misleading claims at the company. The Lordstown board’s report said it found little merit in most of Hindenburg’s claims. But shares of Lordstown, which once traded around $29 a share, have never recovered from the release of the Hindenburg report. The stock was most recently trading around $9.30, down 10 percent at midday.
Lordstown was one of the more high-profile companies to go public by merging with a so-called SPAC. Such blank-check companies are created to raise money from investors for the sole purpose of buying an existing business.
Two other electric vehicle start-ups, Nikola and Canoo have also come under regulatory scrutiny recently. The S.E.C. is investigating both companies, which went public through the SPAC route. Nikola has also been subpoenaed by federal prosecutors.
Mr. Burns launched Lordstown in early 2019 as General Motors was looking for a buyer for a massive auto manufacturing factory in Lordstown, Ohio. GM sold its factory to Mr. Burns’ company for $20 million and became an early investor in Lordstown. Workhorse Group, another electric vehicle company that Mr. Burns had founded, is also an investor.
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Wages grew strongly in June as employers tried to attract employees by paying more, a new U.S. jobs report showed Friday, the latest evidence that workers have the power to demand more in the reopening economy.
Average hourly earnings climbed by 3.6 percent in the year through June and 0.3 percent over the month, matching what economists in a Bloomberg survey had expected.
Yearly wage gains have been affected by the shifting labor force makeup since the start of the pandemic, effects that are waning. But the monthly gain shows that employers are competing for workers as they rush to rehire after the pandemic downturn, especially because the figures followed solid gains in April and May.
Companies are scrambling to hire to meet customer demand, which has surged back as the economy reopens and consumers enjoy restaurant meals, take delayed vacations and spend money saved in the pandemic on other goods and services. At the same time, many would-be employees are lingering on the job market’s sidelines as child care disruptions, health concerns and government support give them reasons to stay home. Other workers are seizing the moment to switch to more attractive positions.
It also takes workers time to shuffle into new jobs, especially after months out of the labor market, during which employees may have reconsidered their prospects. Continued job hopping could keep pressure on employers in coming months.
Policymakers generally see the pickup in wages as good news, but it could create inflation risks if it persists. Higher pay would cost employers more, and they may pass that along to customers as steeper prices. Wage increases in the sectors that have seen strong gains in recent months — like leisure and hospitality, where hourly workers saw their pay jump a striking 2.3 percent from May to June — may affect prices more readily.
“Sectors that use low-wage labor intensively appear to pass most of their labor costs on to prices,” economists at Goldman Sachs wrote in a recent analysis. They expect millions of workers to return to work by September as various pandemic unemployment benefit programs end, releasing pressure by adding to the labor supply.
If that cooling doesn’t happen, it could matter for the Federal Reserve, which is closely watching to see signs that a recent jump in prices could turn into more lasting move higher in inflation.
“What would be troubling would be very wide, across the economy wages at unsustainable levels without high inflation,” Jerome H. Powell, the Federal Reserve’s chair, said in a June news conference. “That’s one of the old formulas for having high inflation. We don’t see anything like that now.”
There is plenty of evidence beyond wage growth that workers have the upper hand. The Conference Board’s index showing that jobs are “plentiful” has soared higher in recent months, job quitting is way up, and people report looking for higher wages before accepting a job. That’s echoed by anecdotes.
“One staffing company contact remarked that he turned away prospective clients that offered starting wages of less than $13 per hour because he will not be able to find anyone at that wage,” the Federal Reserve’s May survey of businesses reported, citing a company in the Cleveland district.
Service industries took the biggest hit in the pandemic recession. Now they are leading the way in the recovery.
Leisure and hospitality businesses added 343,000 jobs in June, the fifth straight month of strong growth. Bars and restaurants accounted for more than half the gain. Still, the industry has a long way to go — its employment is still down more than two million jobs from before the pandemic.
Construction
–238,000 since February 2020
7.6 million jobs in Feb. 2020
Business and professional services
State and local government
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–2.2 million
16.9 million
Retailers, day care providers and warehouses posted gains as well. Temporary jobs, which can be a bellwether for the broader labor market, also grew, partly reversing unexpected declines in April and May.
The data released Friday also showed a big gain in government jobs, mostly in public education. But that may reflect a statistical quirk. The pandemic has thrown off normal seasonal patterns in school hiring, which the Labor Department warned may have distorted the government’s seasonal adjustment formula. Over a longer period, employment in both public and private education remains significantly below its prepandemic level.
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Workers are only slowly returning to the American labor market as the economy rebounds, and the latest jobs report shows that the share of people employed or looking for work continued to stagnate in June.
The labor force participation rate, which tracks the share of people who are working or seeking work, held steady at 61.6 percent in June — although those in their prime working years, defined as ages 25 to 54, participated in greater numbers.
The large number of workers on the sidelines creates big questions for economists and policymakers at the Federal Reserve and White House as they try to gauge the labor market’s recovery.
“That was the weakest part of the report,” Priya Misra, global head of rates strategy at TD Securities. “The fact that participation is not picking up is concerning.”
If most people can be expected to return to the job search, it means substantial room for healing remains. If many have decided to leave the labor market — perhaps to retire — that could leave employers with fewer workers. Fewer workers mean fewer paychecks, less money flowing through the economy, and ultimately less output.
“Most labor force exiters who want a job haven’t searched recently, suggesting that they will re-enter once temporary disincentives to work disappear,” economists at Goldman Sachs wrote in an analysis ahead of the fresh jobs numbers. They expect participation to recover to 62.6 percent by the end of 2022, still 0.8 percentage points below its prepandemic level, “with the gap in participation primarily reflecting early retirements and demographic shifts.”
Teenagers, who had been pouring back into the labor market earlier in the year, worked or looked for jobs in smaller numbers in June, while participation jumped among those aged 20 to 24 and 45 to 54.
Adult men’s participation increased more than adult women’s, and among racial and ethnic groups, participation for Black and Hispanic people increased — in the case of Black workers, sharply — even as white and Asian people were less attached to the labor market.
A stronger than expected report from the Labor Department showing that the economy added 850,000 jobs in June added new fuel to a relentless White House messaging campaign that has cited a flurry of recent data points as evidence that President Biden’s economic agenda is working.
Mr. Biden pointed to both the job growth and wage increases as a sign that his policies are helping the economy to recover from the pandemic downturn. Average hourly earnings climbed by 3.6 percent in the year through June and 0.3 percent over the month, matching what economists in a Bloomberg survey had expected.
As the nation prepares to celebrate Independence Day this weekend, Mr. Biden said, “Today’s job news brought us something else to celebrate.”
Mr. Biden said the pace of job gains was helping to “flip the script” in the labor market, with employers now being forced to compete for workers by raising pay and offering other perks.
“That kind of competition in the market doesn’t just give workers more ability to earn higher wages,” he said. “It gives them the power to demand to be treated with dignity and respect in the workplace. More jobs, better wages. That’s a good combination.”
Administration officials have been aggressively touting new projections from the Internal Monetary Fund and the Congressional Budget Office that suggest the economy will grow at its fastest pace in a quarter century this year, and that price pressures will not spiral out of control. They have also pointed to falling claims for unemployment benefits as a sign of labor market healing.
But they had been stuck in a slump of sorts on the jobs report.
Friday’s report follows two months of job gains that fell short of analyst expectations, prompting criticism of Mr. Biden from Republicans. Lawmakers said the $1.9 trillion economic aid bill the president signed in March was holding back the recovery by extending supplemental benefits for unemployed workers through September, which some businesses blame for difficulties in hiring workers, and stoking rapid inflation.
On Thursday, Republicans on the Ways and Means Committee taunted Mr. Biden in advance, in a news release headlined: “After two underwhelming jobs reports, President Biden’s June report is make or break.”
The details of Friday’s report were not across-the-board strong for the administration. They showed a labor force that is only slowly expanding, even as millions more potential workers receive coronavirus vaccines. Administration officials had predicted workers would flock back to jobs once they were vaccinated.
But other details could support the administration’s theory of the recovery. An accelerating rebound in leisure and hospitality — particularly in food service, which powered much of the gains for June — could reflect surging demand from vaccinated consumers who have more disposable income thanks to direct payments from the federal government as part of Mr. Biden’s economic aid bill.
States and localities also appear to have avoided new waves of layoffs, as reflected in rising state and local education employment. Mr. Biden’s bill spent $350 billion on aid to states, localities and tribal governments, though in the case of many states, their fiscal outlook was already improving even before the aid arrived.
Two days into Didi’s life as a publicly traded company on Wall Street, China’s internet regulator said new user registrations on the Chinese ride-hailing platform would be suspended while the authorities conducted what they called a “cybersecurity review” of the company.
The terse announcement, issued Friday evening in China, did not explain what had prompted the review nor what it would entail — only that its purpose was “to guard against national data security risks, protect national security and uphold the public interest.”
Didi’s stock price fell about 8 percent on Friday.
The surprise intervention by Beijing immediately called to mind last year’s failed initial public offering by Ant Group, the Chinese fintech giant, whose share sale in Shanghai and Hong Kong was halted at the 11th hour after regulators summoned company executives to discuss new supervision.
In an emailed statement, Didi said it would cooperate with the authorities. “We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities,” the statement said.
Didi is China’s leading ride-hailing app, having purchased Uber’s China operations in a 2016 deal that ended a period of fierce competition between the two companies. Didi’s shares began trading on the New York Stock Exchange on Wednesday. The company says its service had 377 million active users in China during the year that ended in March.
Chinese regulators have been ramping up their scrutiny of the country’s wider internet industry since thwarting Ant’s I.P.O., criticizing what they call anticompetitive business practices and inadequate safeguards for consumers and their personal data.
In April, China’s antitrust authority imposed a landmark $2.8 billion fine on Alibaba, the e-commerce giant. A few days later, Didi was one of nearly three dozen Chinese internet businesses that were hauled before regulators and ordered to ensure their compliance with antimonopoly rules. Didi promptly issued a statement, which the antitrust regulator published on its website, vowing to “promote the development and prosperity of socialist culture and science” and to strictly obey the law.
Chinese law requires major tech platforms to observe strict standards when it comes to handling user data.
According to the government’s guidelines for cybersecurity reviews, officials have 30 business days to complete a preliminary review and offer recommendations to regulators, though this can be extended by 15 business days in “complex situations.” Regulators then have a further 15 business days to respond to the recommendations.
The internet regulator’s announcement on Friday said new user sign-ups on Didi would be suspended for the duration of the cybersecurity review, “to prevent the risks from expanding.”
Oil officials were trying Friday to resolve a dispute over quotas that prevented OPEC, Russia and their allies from reaching an agreement on raising production on Thursday.
Members of OPEC Plus, the oil producers’ group, are scheduled to meet again on Friday, but it may still be difficult to reach a deal, according to people familiar with matter.
A preliminary meeting of oil ministers broke up on Thursday when the United Arab Emirates insisted on what amounts to a substantial upward revision of its production quota in the event OPEC Plus extends its output agreement.
Before the meeting broke up, OPEC Plus was leaning toward moving ahead with a plan to increase production by a cautious 400,000 barrels a day each month for the rest of the year, beginning in August. Also on the table was a proposal to extend the current production agreement that expires at the end of April 2022 for the rest of next year. These changes are unlikely to be put in place unless the United Arab Emirates agrees.
Saudi Arabia and Russia, which have come to dominate the group, have argued that revising the quotas — the country-by-country rules governing how much oil the different countries are allowed to produce — would lead to chaos because other countries would also insist on new deals.
The tensions are an indication that increasing demand for oil, and rising oil prices, can test the cohesion of an organization like OPEC Plus. Producers like the United Arab Emirates and Iraq want to make sure that they don’t miss out on opportunities to sell more oil.
Since late last year, oil prices have risen about 85 percent as global economies have started to revive from the impact of the coronavirus pandemic. During this time, OPEC Plus has kept a tight leash on production.
So far the markets have largely shrugged off the dispute. Brent crude was only marginally down on Friday at $75.65 a barrel.
Specifically, the United Arab Emirates and other producers want changes in the crucial baselines for production that they were assigned last year when OPEC Plus reached a deal on output cuts to ride out the pandemic. These figures, from which quotas for most producers are calculated, are based on October 2018 production levels.
The United Arab Emirates, which has big aspirations to increase its oil production, argues that in fairness its baseline should be April 2020, when it produced about 3.84 million barrels a day rather than the earlier baseline of 3.18 million barrels a day.
Analysts say that the United Arab Emirates has become increasingly frustrated with its position in OPEC Plus.
“They have made it very clear that their ambitions are to increase production, and they somehow think that no one is listening to them,” said Amrita Sen, head of oil markets at Energy Aspects, a research firm.
Stuart Joyner, an analyst at Redburn, a research firm, said that because of the heavy investment the United Arab Emirates had been making in oil production, it “does have a legitimate grievance.”
The Persian Gulf country, whose oil is almost entirely produced by Abu Dhabi, is taking a bigger hit — a reduction of close to one third of its capacity — than other OPEC Plus producers.
U.S. stocks rose on Friday after data showed U.S. employers added 850,000 jobs in June, exceeding economists’s expectations of a 720,000 gain.
The payrolls figures for May were revised higher. But the stock market gains Friday were relatively muted as the report painted a mixed picture of the labor market; the unemployment rate unexpectedly ticked up to 5.9 percent.
Investors have been watching the jobs data closely as they try to work out how and when the Federal Reserve will begin to taper its pandemic stimulus measures. The central bank has a mandate to support full employment but also to keep prices stable. Recently, inflation has jumped because supply and demand have become mismatched as businesses reopen. Fed policymakers have said they believe rising price pressures to be temporary, but investors are wary of a change in policy stance.
Wages rose for a third consecutive month. Average hourly earnings climbed 0.3 percent in June from the previous month. “The rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Labor Department report said.
“While wage pressures are clearly building, today’s report will offer an element of comfort,” Hugh Gimber, a strategist at JPMorgan Asset Management, wrote in a note. “The U.S. labor market is heating up, but it is not yet hot enough to force the Fed into adopting a more hawkish tone.”
The S&P 500 index rose nearly 0.6 percent in midday trading. By the end of trading on Thursday, the index had risen 0.9 percent for the week. The yield on 10-year U.S. Treasury notes rose slightly after the data was published to 1.43 percent. It was still near its lowest level in three weeks.
Elsewhere in markets
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Most European stock indexes were higher. The Stoxx Europe 600 closed with a 0.2 percent.
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Shares in Virgin Galactic rose 5.6 percent after Richard Branson said he planned to go on the next test spaceflight on July 11, nine days before Jeff Bezos takes off with his own space company.
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Oil prices slipped. West Texas Intermediate, the U.S. crude benchmark, fell 0.09 percent to $75.16 a barrel. Still, it was near its highest price since late 2018 after officials from OPEC, Russia and their allies failed to reach agreement on Thursday on whether to ease the output quotas. They will meet again on Friday afternoon. Brent crude, the international standard, rose 0.3 percent to $76.07 a barrel.
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Robinhood, the stock-trading app that grew in popularity and notoriety during the pandemic, revealed skyrocketing revenue and a loss of more than $1.4 billion in the first three months of this year, as it took a key step on Thursday toward one of the year’s most anticipated initial public offerings. Its offering prospectus offered the first full look at the company’s financial performance. Nearly 18 million people now use Robinhood’s app to buy and sell stocks and cryptocurrencies, with $81 billion in assets under its custody. In 2020, Robinhood eked out a profit of $7 million. It reported profits in two out of the last nine quarters.
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An effort to push the most sweeping changes to the global tax system in a century gained significant momentum on Thursday when 130 nations agreed to a blueprint in which multinational corporations would pay an appropriate share of tax wherever they operate. The result of the negotiations, overseen by the Paris-based Organization for Economic Cooperation and Development and revived this year by President Biden, is also remarkable because it includes China, Russia and India among the signatories — large economies that had been wary of a tax overhaul.
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Today in the On Tech newsletter, Shira Ovide talks to Kate Conger about how restaurants and delivery apps like Uber Eats and DoorDash are thinking about post-pandemic home delivery and addressing complaints, including fees and complexities that rankle restaurant owners and some diners.
Source: https://www.nytimes.com/live/2021/07/02/business/economy-stock-market-news/
