The hiring jumped in July despite fears about the Delta variant of Covid-19 and as companies struggled with a labor shortage, the fastest in nearly a year, the Labor Department reported on Friday.
Non-farm payrolls rose 943,000 for the month, while the unemployment rate fell to 5.4%, according to the department’s Bureau of Labor Statistics. The raise was the best since August 2020.
Economists polled by Dow Jones had searched for 845,000 new jobs and an overall unemployment rate of 5.7%. However, the estimates varied due to conflicting headwinds and tailwinds and an uncertain future course for the economy.
Average hourly wages also rose faster-than-expected, rising 0.4% for the month and 4% year-over-year at a time when concerns about continued inflationary pressures mount.
“Data over the past few months suggests that increasing labor demand related to the recovery from the pandemic may have pushed wages higher,” the BLS said in the report, but warned that the effects of Covid are still ongoing Distorting data and wage increases are inconsistent across industries.
Markets reacted positively to the report, with the Dow and S&P 500 making new record highs on Friday morning.
“It feels like a Goldilocks report. They haven’t been too hot in terms of wages, but not too low in terms of job growth,” said Beth Ann Bovino, chief US economist at S&P Global Ratings.
The decline in the overall unemployment rate looked even more pronounced when you consider that the employment rate rose to 61.7%, its highest level since the pandemic broke out in March 2020. A separate calculation that takes discouraged workers and part-time workers into account fell even further to 9.2% from 9.8% in June for economic reasons.
“Not only was this a strong employment report on nearly all metrics, but it also signals other good things to come,” said Robert Frick, corporate economist with the Navy Federal Credit Union.
As in previous months, leisure and hospitality led to job creation with 380,000 new jobs, 253,000 of which in bars and restaurants. The sector was hit the hardest during the pandemic but posted steady gains during the economic reopening.
The leisure and hospitality unemployment rate fell from 10.9% in June to 9% in July, compared to 25% a year earlier, although there are still about 1.8 million fewer workers than before the pandemic. Industry wages rose 1.2% month-over-month and 3.1% year-over-year.
The education sector also recorded strong growth with 261,000 new hires. However, the BLS warned that the pandemic skewed the sector’s numbers and likely increased the number for July.
This also increased private payrolls for the month by 703,000, which was roughly in line with expectations.
Professional and business services added 60,000; transportation and warehousing added 50,000. Other services (39,000), healthcare (37,000), manufacturing (27,000), information (24,000), finance (22,000) and mining (7,000) also grew. Retail posted a loss of 6,000 while construction and wholesale were unchanged.
The numbers come amid an onslaught of new coronavirus cases in the U.S. and around the world, with the most serious diseases occurring in areas with larger unvaccinated populations. The surge has raised fears that it could slow economic activity in a recovery that began in April 2020 and has shown resilience despite the periodic flare-up of Covid cases.
At the same time, the US is waging an ongoing battle against labor shortages.
Recruitment site Indeed estimated there were 9.8 million job openings as of July 16, far more than the 8.7 million considered unemployed. However, a survey of 5,000 jobseekers saw a decline in the number of citing health concerns as a reason for not looking, with an increasing number citing a lack of need due to a financial cushion as the top response.
The unemployment rate has fallen from the pandemic high of 14.8%, but remains well above the 3.5% before the crisis. Federal Reserve politicians have vowed to maintain ultra-loose monetary policies until they see stronger signs of full employment, despite Democratic Senator Joe Manchin on Thursday criticizing the central bank, saying it is risking rapid inflation in its job search.
“Although there have been some cracks in the armor, today’s job numbers have shown that our economy is once again incredibly resilient and moving forward,” said Ryan Detrick, chief market strategist at LPL Financial. “That number was really good, but the best part was that it wasn’t so strong that the Fed had to change its policy.”
The employment growth in July contributed to an overall positive employment climate. The May numbers were revised upwards by 31,000 to 614,000, while the June number rose by 88,000 to 938,000 for a total profit of 119,000.
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