Plenty of economic data points to a clearer picture of post-pandemic life returning to normal across the United States. Among them, the June jobs report was not only generally positive but also represented a meaningful upside surprise.
Even as more employers acknowledge the growing difficulty in finding and hiring workers to fill the abundance of job openings, the addition of 850,000 jobs during the month clearly indicates that many have had success in doing so. Upward revisions to the preceding months topped off that gain by another 15,000. The fact that the jobless rate ticked modestly higher to 5.9 from 5.8% in May conveys another side of the story, one in which nearly 9.5 million individuals are unemployed. For all the progress that’s been made, there’s still more work to be done.
The good news for unemployed Americans is that there is no shortage of available jobs. Recent surveys of small business owners tell the story well, noting that finding workers remains among their greater difficulties, if not the greatest. Yesterday’s report from the Institute for Supply Management painted a similar picture for the manufacturing sector. Rising prices for raw materials are a concern, but finding qualified workers to allow producers to ramp up to meet strong demand is a challenge.
As anticipated, gains were more heavily concentrated in the service sector, which had lagged the good-producing economy since the economy began to bounce back last year. The divergent jobs picture reflected strong consumer spending on goods at the time, while the more recent shift toward job gains in the service industry reflects the evolution of those spending habits as mass vaccination has progressed and restrictions on travel and mobility have been lifted.
Stiff competition for available workers has led to an outsized 3.6% gain in average hourly wages over the past year. Wage gains are likely to persist to some degree as long as strong demand persists and the disincentives to return to work exist.
Why the difficulty? Most believe that a combination of lingering concerns about COVID-19 risk, childcare limitations, and enhanced unemployment benefits remain significant disincentives for many sidelined workers to return to work. Absent a surprise complication in terms of the spread of the virus, these factors should continue to clear in the coming months, setting the economy up for continued progress and even a potential acceleration in job creation later this year.
The bottom line? The economy has achieved a considerable recovery from the COVID-19 pandemic over the last year, but the public health crisis created lingering scars. As time elapses and the country moves toward herd immunity, the gap between record job openings and the swollen ranks of the unemployed should be reduced.
Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.