Wages are set to avoid spiraling prices as private sector jobs exceed pre-pandemic rate

The June employment report showed the economy added 372,000 jobs last month, with the private sector adding 381,000. Private sector employment is now 140,000 jobs above its pre-pandemic level. Total employment is still down 524,000, as local government employment is 599,000 below pre-pandemic levels, and state government employment is 57,000 below pre-pandemic levels. The unemployment rate was unchanged at 3.6 percent for the fourth consecutive month.

Wage growth moderates further

Perhaps the best news from this report is further evidence of moderation in wage growth. The annualized rate of salary growth, comparing the last three months (April, May, June) with the previous three months (January, February, March), was 4.3 percent. That’s down from a 6.1 percent annualized rate, comparing winter (November, December, January) to fall (August, September, October).

This is a big deal because the Fed’s plans for aggressive rate hikes were based on a concern for a 1970s-style wage-price spiral. wages are slowing down. As it stands, the 4.3 percent annualized wage growth rate is just 0.9 percentage point higher than the 3.4 percent rate in 2019, when inflation was comfortably below the 2-year target. .0 percent from the Federal Reserve.

Wage growth slows sharply

Construction again adds jobs, manufacturing employment exceeds pre-pandemic levels

Construction added 13,000 jobs in June, with gains elsewhere offsetting a small decline in residential construction. Overall employment in the sector is now 0.6 percent above the pre-pandemic level. The decline in housing starts will weigh on employment in the sector, although this will be at least partially offset by easing supply chain issues, which is allowing more to be completed. Manufacturing added 29,000 jobs, boosting employment in the sector slightly above its pre-pandemic level.

Air Transport and Commerce Add Jobs

Air transport added 7,500 jobs in June. Employment in the sector is now 7.9 percent above the pre-pandemic level. The retail sector added 15,400 jobs, putting employment now 1.2 percent above the pre-pandemic level.

Healthy but more normal job growth in hotels and restaurants

Hotels added 14,800 jobs in June, while restaurants added 40,800 jobs. These are strong numbers but not out of line with what might be expected in a normal month with good job growth. These sectors were among the hardest hit by the pandemic.

Hotel employment is still 18.0 percent below its pre-pandemic level. Restaurant employment is 5.9 percent lower. With a permanent decline in business travel, hotels are not likely to regain their pre-pandemic employment levels. The same is likely to happen with restaurants, where actual sales are already well above pre-pandemic levels.

Nursing homes and child care centers add jobs, but employment is still well below pre-pandemic levels

Both the nursing homes and child care sectors have struggled to add jobs in the recovery, as low wages and difficult working conditions make these jobs relatively unattractive. Nursing homes and day care centers added 5,400 and 10,600 jobs in June, respectively. This leaves employment in the sectors 14.4 percent and 9.6 percent below pre-pandemic levels.

Local government adds 5,000 workers, employment remains 599,000 less than pre-pandemic level

Like nursing homes and day care centers, state and local governments have had a hard time attracting workers in the recovery. Local government employment remains 4.1 percent below pre-pandemic levels. More than half of the drop is in local government education. State government employment fell by 57,000, or 1.1 percent from pre-pandemic levels.

The U-6 measure of labor market slack reaches an all-time low

While the unemployment rate was unchanged at 3.6 percent in June, a sharp drop in the number of people involuntarily working part-time lowered the U-6 measure of labor market slack to 6.7. percent, the lowest level on record.

Fall in labor force participation rates

The overall labor force participation rate (LFPR) fell 0.1 percentage point to 62.2 percent. The LFPR for men of productive age (25 to 54) was reduced by 0.3 percentage points, while for women of productive age it decreased by 0.2 percentage points. The June LFPR for men was 0.8 percentage points below its pre-pandemic peak, while it was 0.5 percentage points lower for women.

Stable average workweek length

The length of the average workweek was unchanged at 34.5 hours in June. For production and non-supervisory workers, it was 34.0 hours, down from 34.3 hours last June. Employers who cannot find workers often increase workweeks. This doesn’t seem to be a problem now.

The proportion of unemployment due to voluntary resignations increases, but still below the peaks

The percentage of unemployment due to voluntary resignations increased to 14.0 percent, still well below the peaks of more than 15.0 percent reached in February of this year and the peaks reached in 2000 and 2019. This is consistent with a strong but healthy labor market.

Another really great jobs report

The June report showed considerably stronger job growth than was widely expected. It also showed a job market that seems more normal, although still very strong. We continue to see moderation in wage growth, which should ease concerns about the wage-price spiral of the 1970s. The unemployment rate remains near a 50-year low and the U-6 measure of labor market slack is the lowest on record. If the economy stays on this path, the second half of 2022 should look very good as supply chain issues are largely resolved and prices return to more normal levels in many areas.

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