USA creates nearly 1 million additional jobs


USA creates nearly 1 million additional jobs

Demand strongest in the labor-intensive service sector

At the end of May, a vacancy notice was posted outside a Starbucks in New York City. (Reuters photo)

The recovering US economy created 943,000 new jobs in July, according to government data released on Friday, as the hard-hit industries continued to normalize.

The result was just below the million jobs some economists expected, but enough to cut the unemployment rate by half a point to 5.4%, the Labor Department reported.

There have been notable increases in recruitment in the leisure, hospitality and education sectors, the report said.

Labor demand in the labor-intensive service sector was strong, suggesting that the economy maintained its strong momentum at the start of the second half of the year.

The July total was slightly higher than the 938,000 digits added in June.

However, the job growth was flattered by shifts in seasonal school employment due to the Covid-19 pandemic. Estimates range from as low as 350,000 to 1.6 million.

“Labor market conditions appear healthy as we enter the third quarter as labor-intensive service companies continue to recruit with pent-up demand,” said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.

Before the pandemic, education employment typically fell by around 1 million jobs in July as schools closed, but this year many students in summer school are catching up after the disruption caused by the coronavirus. This likely dismissed the model or seasonal factors the government uses to filter seasonal variations out of the data, which gave payroll a boost.

“Combined with the expansion of summer school programs in several major school districts across the country, the seasonal adjustment process gave another big boost to payrolls in July,” Bullard said.

The strong employment report followed last week’s news that the economy fully recovered in the second quarter from the sharp loss of output it suffered during the very brief pandemic recession. Economic growth will be around 7% this year, which would be the fastest since 1984.

Labor market health will weigh heavily on the Federal Reserve’s next monetary policy moves.

“Strong readings in the next few months seem to give the green light for an advance notice of tapering at the Fed meeting in September,” said James McCann, deputy chief economist at Aberdeen Standard Investments in Boston.

But rising Covid infections, fueled by the delta variant of the coronavirus, pose a risk. While major disruptions to economic activity are not expected, nearly half of the population could be fully vaccinated, but rising cases could keep workers at home and hinder the setting.

A labor shortage has left employers unable to fill a record 9.2 million jobs. The lack of affordable childcare and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. In addition, there were pandemic-related retirements and career changes.

The labor shortage is expected to subside in the fall when schools reopen to face-to-face learning, but some economists are less optimistic, arguing that the economy has created many low-skilled jobs and that there are not enough people to take them in .

“One of the biggest problems we have right now is that about two-thirds of our vacancies are in non-graduate jobs,” said Ron Hetrick, senior labor economist at Emsi Burning Glass in Moscow, Idaho.

“We have around 6 million vacancies that do not require a university degree, but only 3.4 million unemployed people without a university degree.”

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