Sunday, July 21

Hiring in the United States is rising sharply, along with wages

Employers created 272,000 jobs last month, the Labor Department reported Friday, well above what economists had expected as hiring had gradually slowed. That’s an increase from the average of 232,000 jobs over the previous 12 months, muddying the picture of an economy that is relaxing to a more sustainable pace.

What most concerns the Federal Reserve, which meets next week and again in July, is the 4.1% increase in wages over last year, a sign that inflation may not yet have been defeated.

“For those who thought they would see a rate cut in July, that door has largely been closed,” said Beth Ann Bovino, chief U.S. economist at US Bank. While wage increases are good for workers, she noted, persistent price increases undermine their spending power.

Shares fell shortly after the report was released, before regaining ground to trade slightly higher. Treasury bond yields, which track expectations for Fed rate movements, rose sharply and remained elevated throughout the trading day.

But even the picture of an accelerating job market is not entirely clear. Elsewhere in the report, the unemployment rate rose to 4%, the highest level since January 2022. This number is taken from a survey of households, which showed essentially no job growth over the past year and an increase in part-time employment, which has seen growth in part-time employment displace full-time positions.

Data from employers that generate job growth numbers tend to be more reliable, but the household survey has recently been more consistent with other indicators. Retail sales flattened. Gross domestic product fell significantly in the first quarter. The number of job offers is at its lowest level since 2021.

That’s why most economists expect job growth to continue to slow and the unemployment rate to rise further this year.

“Other than healthcare, we don’t see much strength in the data,” said Parul Jain, chief investment strategist at MacroFin Analytics. “Growth in 2024 is unlikely to be very strong, consumers are retreating a lot and we expect disposable income to be affected as well.”

Health care was the backbone of hiring for two and a half years, accounting for 18.6% of jobs added. An aging population has spurred demand, and increased insurance coverage through the Affordable Care Act has given more people access to care.

On the other hand, leisure and hospitality, which have been hit harder than any other sector by Covid-19 lockdowns, took until April to regain employment levels from February 2020. Expectations of a record summer travel season could push this number higher in the coming months, although few expect job growth to surpass last year’s numbers.

For example, United Airlines announced this week that it expects to add 10,000 jobs this year, up from 16,000 in 2023 and 15,000 the year before, as the post-pandemic recovery turns to organic growth.

One reason job growth beat forecasts was public employment, which recovered quickly but was expected to collapse as federal pandemic relief funds ran out. Instead, the sector added 43,000 jobs in May. But a slowdown could still be in the offing.

It’s already evident to Peter Finch, the superintendent of the West Valley School District, which is located outside Yakima, Washington. Funding from the American Rescue Plan Act had allowed him to add staff members such as mental health counselors and tutors, but he is now no longer filling positions because people are leaving.

“It’s a tough time for education,” Dr. Finch said. “If you have fewer resources, you can’t provide the same services you used to — that’s the reality.”

The labor market’s impressive run has been fueled by both a resurgence in legal immigration and an influx of millions of migrants with temporary status, many of whom have found work with the help of expedited work permits. Hiring has fallen sharply for native-born workers but has held up for foreign-born workers, according to calculations by the W.E. Upjohn Institute for Employment Research.

That impact could also fade with the implementation of President Biden’s executive order restricting asylum seekers at the southern border.

A positive sign concerns the workforce: the percentage of people aged between 25 and 54 who work or are looking for work has reached the highest level since the beginning of 2002, equal to 83.6%. Women in that age group led the way and in May achieved the highest participation rate ever recorded.

The picture isn’t so rosy for adults in their 20s, whose participation rate dropped in May. As employers hang on to their employees and fewer and fewer leave voluntarily, there is less space for those with little work experience, who find work at lower rates.

Even workers over 55 have not returned to the workforce in large numbers: their participation rate remains two percentage points lower than before the pandemic. But some have been pushed out because costs have risen and pension funds have been unable to cover them.

Take John Refoy, 67, who retired from the Navy after 33 years as a maintenance technician