US employment likely accelerated in June as businesses increase benefits
- Non-farm payrolls expected to increase by 700,000 in June
- Unemployment rate drops to 5.7% from 5.8% in May
- Average hourly earnings forecast up 0.4%; stable working week
WASHINGTON, July 2 (Reuters) – US job growth likely picked up in June as companies, desperate to boost production and services amid soaring demand, raised wages and offered incentives to attract millions of reluctant unemployed Americans into the workforce.
The closely watched Department of Labor employment report on Friday will likely show that the economy closed the second quarter with strong growth momentum, following a reopening made possible by COVID-vaccinations. 19. More than 150 million people are fully immune, leading to the lifting of pandemic-related restrictions on businesses and the lifting of masks.
Despite the anticipated acceleration in hiring, job gains would likely still be less than the million or more per month that economists and others predicted at the start of the year.
“There are jobs, but the workers are not there,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles.
The minimum wage that workers will accept has risen dramatically since the start of the pandemic, he said, “and many workers have an exaggerated view of the value of their skills and therefore they are unwilling to resume work at the prevailing wage “.
According to a Reuters survey of economists, non-farm payrolls probably increased by 700,000 jobs last month after increasing by 559,000 in May. This would be more than the monthly average of 540,000 over the past three months. Still, employment is estimated to be around 6.9 million jobs below its peak in February 2020.
Estimates ranged from 376,000 to 1.05 million. The unemployment rate is expected to drop to 5.7% from 5.8% in May. The unemployment rate has been underestimated by people mistakenly classifying themselves as “employed but absent from work”. There is a record 9.3 million job vacancies.
Politicians, businesses and some economists have blamed improved unemployment benefits, including a weekly $ 300 government check, for the labor shortage. Lack of affordable child care and fears of contracting the coronavirus have also been blamed for keeping workers, mostly women, at home.
There have also been retirements linked to the pandemic as well as career changes. Economists generally expect the squeeze in labor supply to ease in the fall with the reopening of schools and the expiration of government-funded unemployment benefits, but warn that many unemployed people will probably never return to work. Record stock prices and soaring home values also encouraged early retirement.
“Labor shortages could become less of a constraint from September onwards, but there is no guarantee, as evidence suggests that more than 2 million people have potentially taken early retirement in the past. the past year, “said James Knightley, chief international economist at ING New York. .
According to the job search engine, in fact, 4.1% of job postings advertised hiring incentives in the seven days ending June 18, more than double the share of 1.8 % of week ending July 1, 2020. Incentives, which included signing bonuses, retention bonuses, or one-time cash payments upon hire ranged from $ 100 to $ 30,000 during the month ended June 18.
Some restaurant jobs pay up to $ 27 an hour plus tips, according to posts on Poachedjobs.com, a national job site for the restaurant and hospitality industry. The federal minimum wage is $ 7.25 an hour, but it is higher in some states.
“The point is, the competition for talent is going to get fierce,” said Ron Hetrick, director of recruiting products at Emsi, a labor market data company in Moscow, Idaho. “Businesses can no longer assume that there will be enough people for everyone.”
Average hourly earnings are expected to rise 0.4% last month after rising 0.5% in May. That would bring the year-on-year wage increase to 3.7% from 2.0% in May. Annual wage growth will be partly flattered by so-called base effects following a sharp drop in income last June.
With employment not expected to return to pre-pandemic levels until 2022, rising wages are unlikely to worry Federal Reserve officials, even if inflation rises due to supply constraints. Fed Chairman Jerome Powell has repeatedly said he expects high inflation to be transient.
“There is probably going to be some acceleration in wage growth, but not enough to really change what we already know about inflation over the next few months,” said James McCann, deputy chief economist at Aberdeen Standard Investments . “What the data might do is cement investor thinking about when the Fed might announce a decrease in asset purchases.”
The US central bank last month opened discussions on how to end its massive bond purchases during the crisis. Read more
Consistent with recent trends, the employment gain in June was likely led by the leisure and hospitality industry. Manufacturing employment likely increased, although gains were likely held back by rampant labor shortages. The Institute for Supply Management reported Thursday that its measure of factory employment contracted for the first time in seven months in June. Read more
Construction payrolls likely rebounded after declining in May. The sector is supported by strong demand for housing, although the price of timber is hampering housing construction.
Government employment has likely increased significantly, driven by education from state and local governments. Layoffs at the end of the school year were probably less numerous than the previous year. This is expected to increase the seasonally adjusted education payroll.
The average work week probably held steady at 34.9 hours
Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci
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