US labour market roars back to life as firms hire 850,000 workers in June
US businesses embarked on a hiring spree in June, with the American economy adding 850,000 jobs, new figures published today reveal.
The sharp rise builds on May’s 583,000 increase, triggered by companies seeking to boost output to cope with surging demand.
The gains in hiring blew away predictions by experts. Economists polled by Reuters had forecast payrolls increasing by 700,000 jobs last month.
But, the unemployment rate inched up to 5.9 per cent from 5.8 per cent in May, according to figures published by the US Labour Department.
Read more: UK unemployment rate falls to 4.7 per cent as lockdown easing spurs hiring
Economists expected the joblessness rate to dip to 5.7 per cent. The rise can be partly attributed to people misclassifying themselves as being “employed but absent from work.”
Annual wage increases increased sharply by 3.6 per cent in June, caused by firms responding to labour shortages by upping hourly pay rates to attract staff. Some restaurant jobs offer as much as $27 per hour plus tips, according to postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry.
Average hourly earnings rose 0.3 per cent last month.
Hiring activity was strongest in the US services sector, indicating that firms rushed to scale their staff levels to meet rising consumer spending at hospitality and leisure businesses.
Xian Chan, chief investment officer, Wealth Management, HSBC, says: “Today’s positive US employment release is a further signal the recovery is well underway.”
“Key for us was the fact that jobs gains were led by the services sector, signalling the strong positive momentum in these areas.”
Neil Birrell, chief investment officer at Premier Miton Investors, says: “A number of states are ending the enhanced federal COVID-19 unemployment benefits which is likely to push more people back to work, so giving the economy another shot in the arm.”
Labour shortages could persist
Despite the positive hiring figures, analysts have warned that existing shortages in the labour market are likely to persist in the long run.
American firms – particularly in the hospitality industry – have been reporting they are struggling to attract enough workers to catch up with consumer spending running extremely hot.
Labour shortages have been blamed on generous unemployment benefits disincentivising people from work, early retirements as workers reconsidered their life goals during the pandemic and a lack of childcare provision.
Read more: US inflation rate climbs at fastest pace since 2008
“It appears as though some workers have considered their options and career situations during the pandemic and have decided not to return to their old jobs on the same terms” Chan added.
However, others noted that although wage growth is gathering pace as a result of firms offering higher wages to scale staffing levels, the labour market is still not in a position to prompt the Federal Reserve to tighten monetary policy.
Hugh Gimber, global market strategist at J.P. Morgan Asset Management, says: “While wage pressures are clearly building, today’s report will offer an element of comfort. The US labour market is heating up, but it is not yet hot enough to force the Fed into adopting a more hawkish tone.”
Naeem Aslam, chief market analyst at Ava Trade, says: “It is very much clear that labor market is going from strength to strength which is very positive for overall investment sentiment.”
Ten year treasury yields edged down on the news, while the blue chip S&P 500 was up 0.31 per cent.