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The numbers: The U.S. created a robust 943,000 jobs in July — the biggest gain in nearly a year — in a sign the economy still has plenty of momentum even as the delta strain of the coronavirus emerged as a fresh threat.
The increase in hiring last month exceeded Wall Street’s estimate. Economists polled by The Wall Street Journal had forecast 845,000 new jobs, but estimates range far and wide because of so much uncertainty about the pace of the labor market’s recovery.
Privately owned businesses added 703,000 employees last month, mostly at restaurants, hotels and other providers of leisure and entertainment.
Government payrolls also rose by 240,000, making the strong gain in employment last month look a bit better than it really was. The increase largely reflects seasonal swings in education whose ups and downs have been exaggerated by the pandemic.
The unemployment rate fell sharply to a fresh pandemic low of 5.4% from 5.9% in June, the government said Friday. Yet the official rate likely underestimates true unemployment by two to three percentage points, economists say.
More encouraging, the percentage of people either working or looking for work rose a tick to 61.7% in July. The so-called labor force participation rate has been depressed since last summer with millions of previously employed Americans still missing from the workplace.
Many economists predict more people will rejoin the labor force in the fall after schools reopen and extra federal benefits put in place during the pandemic expire. A lack of labor is partly holding back an otherwise robust U.S. economic recovery.
Read: U.S. economy tops pre-Covid level as GDP surges at 6.5% pace
Yet some are more doubtful. They contend many of the jobless either lack the skills companies want or don’t live in areas where demand for workers is greatest. A wave of up to 2 million retirements during the pandemic has added to the labor shortfall.
In premarket trading, the U.S. stock market appeared headed for an opening increase. The report is unlikely to nudge the Federal Reserve to speed up its plans to withdraw its support for the economy, but it puts the central bank one step closer.
Big picture: The economy is still expanding at a rapid pace and so far it hasn’t suffered much from the rise of the more contagious delta strain.
But the economy could grow faster and recover more quickly if more people went back to work.
Will they? That’s the million-dollar question. The U.S. is still about 6 million jobs short of its pre-crisis peak and the working-age population has also grown.
Many companies have increased pay or offered other incentives to attract workers, but even that hasn’t been enough to persuade more people to rejoin the labor force. Wages have risen a generous 4% over the past year.
At the current rate of hiring, the U.S. won’t regain all the lost jobs at least until early 2021 — and it could even take a lot longer than that.
Key details: The increase in hiring was led, as it has been for months, by companies that cater to the renewed desire by Americans for leisure, travel and entertainment.
Bars and restaurants added 253,000 new workers in July. Hotels added 74,000 employees and arts and entertainment companies increase payrolls by 53,000.
Service-oriented companies boosted employment by 659,000 last month, a bit lower than the 724,000 increase in June in perhaps a cautionary sign.
Construction companies hired 11,000 workers and manufacturers added 27,000 jobs. Both industries also suffered from a shortage of skilled labor, not to mention high prices or major shortages of key supplies.
The only industry to lose jobs last month was retail. Employment fell by 5,500, probably because of the consumer shift toward spending on services such as dining out.
The size of the labor force grew by a quarter of a million last month, but it’s still not nearly enough to make a dent in the problem of so many open jobs and too few workers to fill them.
Economists are watching closely in the next several months to see if a flood of people start looking for work again.
“As Covid concerns abate further, schools fully reopen and unemployment insurance benefits expire, the labor force participation rate should pick up further going into the fall,” economists at Morgan Stanley said.
About half the states have already stopped giving out extra federal benefits, but a larger concentration of unemployed live in states such as New York and California that have retained them.
Job gains in June and May, meanwhile, were a combined 119,000 higher than previously reported.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to higher in Friday trades.
