U.S. employers added 372,000 new jobs in June, surpassing economists' forecasts and defying recessionary fears—at least for now, according to the latest employment report from the Bureau of Labor Statistics.
Private-sector employment recovered the net job losses due to the pandemic and is 140,000 jobs higher than it was pre-pandemic, while overall employment continues to close the gap with its pre-pandemic level, now just 524,000 jobs shy of where it was in February 2020.
The unemployment rate held at 3.6 percent for the fourth month in a row, close to what is considered full employment and near a half-century low.
"You can put away your recession alarm bells," said Nick Bunker, the economic research director for North America at the Indeed Hiring Lab. "Yes, job growth has slowed from its torrid pace earlier this year. And yes, some indicators show a contraction in employment in June. But the overwhelming signal is that the U.S. labor market is still very strong, job growth continues to be robust, and joblessness remains low."
The labor market remains a bright spot while the broader economy slows, said Daniel Zhao, Glassdoor senior economist. He pointed out that for context, the job gains in 2019's hot labor market averaged only 164,000 per month. "The modestly slower pace we're seeing now is not a cause for concern if the pace can be maintained," he said.
The U.S. labor market "is defying gravity," said Becky Frankiewicz, president, ManpowerGroup, chief commercial office, North America. "In human terms, there are 11.3 million jobs chasing just 5.9 million unemployed Americans. Hiring confidence remains strong as employers navigate tension between two narratives about the economy—fears of a possible recession stoked by inflation are eclipsed by the simple reality that employers can't hire fast enough to meet demand. This puts workers in all sectors firmly in the driver's seat."
The labor market could be slower to respond to a recession this time around, said Ron Hetrick, senior economist at labor market data provider Lightcast, based in Moscow, Idaho. Unlike previous downturns, where employers filled jobs during the boom and shed workers when the economy cooled, employers haven't been able to find enough workers to staff up during the recovery, he explained.
"You can't lay off what you don't have," Hetrick said. "Some industries are starting to cool off, but they never really filled the jobs they had open. This may be an economic downturn, but I don't think you're going to see the layoffs that accompany it."
Broad-Based Gains
The professional and business services sector led job creation, with 74,000 new positions. "Even with concerns about layoffs in tech and finance, professional and business services and information (+25,000) both continued to show strong job gains," Zhao said.
Other major jobs contributors included leisure and hospitality (+67,000), and health care (+57,000). Employment in tourism, hotels, bars and restaurants—the most battered pandemic industries—is still down by 1.3 million, or 7.8 percent, since February 2020.
"Gains were surprisingly large in manufacturing, where employment had appeared to be falling in recent manufacturing surveys; construction, which appeared likely to shed jobs due to a cooling housing market; and transportation and warehousing, which some observers expected would be due for losses as consumers shift back to in-person shopping," said Julia Pollak, chief economist at ZipRecruiter. "Recent losses in brick-and-mortar retail reversed with that sector finally adding jobs again," she added.
The only major sector to lose jobs in June was in government, which shed 9,000 positions.
Pollak noted a glaring disparity in the report: while employers reported strong job creation, it was accompanied by a decline in overall employment levels and labor force participation.
The number of people in the labor force fell by 353,000 in June and the labor force participation rate ticked down to 62.2 percent in June from 62.3 percent in May. Participation dropped broadly, with declines among men, women, and most alarmingly, prime-age workers ages 25 to 54.
An alternative measure of unemployment that includes discouraged workers and those holding parttime jobs for economic reasons also fell sharply, dropping to 6.7 percent from 7.1 percent.
"The number of people employed part time for economic reasons declined by 707,000 to 3.6 million in June and is below its February 2020 level of 4.4 million," Pollak said. "This indicates that workers are finding the hours they want and managing to switch from part-time jobs to more stable, better paying full-time jobs in high numbers."
Wages Cool
Average hourly earnings increased by 10 cents in June and were up 5.1 percent year-over-year, down from 5.3 percent in May.
"Rumors of the decline in wage growth have been greatly exaggerated," Bunker said. "The latest data suggest that wage growth for production workers is leveling off close to 6 percent and not dropping substantially. Workers are no longer seeing accelerating wages, which should reduce concerns about a wage-price spiral, but with inflation still high, workers are unlikely to see further gains in inflation-adjusted wages."
"After seeing months of rapid wage growth, wages are stabilizing," said John Gulnac, vice president at staffing and recruiting firm Adecco. "If you're employed in retail, or you're working a second or third shift in manufacturing operations where the labor pool is tight right now, those sign-on bonuses are still there. But they're not as widespread as they were three or four months ago."
Candidates Still Have the Power
Overall, it remains a very tight labor market and even more so a candidate's market, Gulnac said. "While there is still an ongoing and decided effort to attract talent, retention strategies have become top of mind for employers across the board," he said.
A Lightcast analysis of job postings data shows that employers are starting to pull back from the measures they've been using to attract workers in a tight market, such as starting bonuses, or stating "no experience required." This suggests that employers may be pulling back on their recruiting efforts, but not actually laying off talent, said Rucha Vankudre, Lightcast senior economist. "Employers have been offering all kinds of incentives to get workers," she said. "At some point, if employers realize there just aren't enough people to go around, are they going to stop trying to throw everything out there?" she asked.
Frankiewicz added that the empowered worker has spread from offices and cubicles to factories and frontlines. "Truck drivers, not bankers, are the ones scoring big bonuses," she said. "Across the board, employers must get creative and offer more flexibility and opportunities for development. To attract and retain the talent they need to grow, employers must focus on three key areas: flexibility, employee wellbeing, and training and reskilling."