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The American economy flourished into midsummer with a sharp surge in new hires and overcame job search difficulties as the recovery appeared to be firmer.
Employers created 943,000 jobs in July, the Labor Department reported on Friday, with restaurants and bars leading the way. It was the best monthly performance in nearly a year and was accompanied by a sharp drop in the unemployment rate to 5.4 percent, its lowest level since the pandemic began of 5.9 percent.
A cloud lay over the good numbers: the data was collected in the first half of last month before the delta variant of the coronavirus exploded in many parts of the country. Experts warn that a prolonged outbreak could pose a threat to industries that are just regaining a foothold.
However, after significant job gains in May and June, the July results confirmed the recovery is continuing, aided by healthy consumer spending, trillions of dollars in government support and a revival in business investment.
“It’s a clearly positive report,” said Michael Gapen, Barclays’ chief US economist. “The labor market conditions are strong. Unemployment benefits, risk of infection and restrictions on childcare do not prevent a solid attitude. “
For the Federal Reserve, the July data should give confidence that the economy is on a solid path.
The Fed has kept rates close to zero since March 2020 and is buying up bonds every month. The job growth will give the central bank more confidence that the economy is doing well and keep it on track to announce a plan to slow down bond buying in the coming months.
In remarks from the White House, President Biden welcomed the report as an expression of the fact that his policies had also had a decisive impact, including efforts to encourage workers to get vaccinated against the coronavirus.
“No doubt we will have ups and downs along the way as we continue battling Covid’s Delta Wave,” Biden said. “The following is now undisputed: The Biden Plan works, the Biden Plan brings results and the Biden Plan moves the country forward.”
The upward revision of the May and June numbers created nearly 2.5 million jobs in the past three months, bringing the economy three-quarters of the way to restoring the 22.4 million jobs that were wiped out at the start of the pandemic.
“The business is incredible,” said Tom Gimbel, CEO of LaSalle Network, a recruiting and recruiting firm in Chicago. “That shows me that the companies are very optimistic.”
Leisure and hospitality companies devastated by bars and restaurants closings last year contributed most to the July hiring, adding 380,000 to their payrolls. These included 253,000 jobs in catering establishments, as well as jobs in accommodation and in the arts, entertainment and leisure.
Exceptionally for a summer month, July also led to a significant increase in the number of jobs in education. Instead of letting teachers go, as in the past, schools kept more workers on the payroll, increasing the seasonally adjusted numbers.
Local governments added 221,000 education jobs after spike in June, and private institutions added 40,000 jobs.
Manufacturing and construction saw more moderate gains, hampered by higher commodity prices and a shortage of components such as semiconductors. Retail jobs fell slightly after two months with large increases. But the number of people employed in professional and business services rose by 60,000, a sign that the business sector is booming.
“Companies continue to hire salespeople in a number I’ve never seen before,” said Mr. Gimbel of LaSalle Network. “The great demand is entry into the middle tier with salaries between 45,000 and 90,000 US dollars. It is the rebirth of the middle manager. “
For much of the year, companies reported difficulties filling vacancies as they tried to keep pace with consumer demand and rebuild their workforce – an anomaly in a labor market still a long way from full employment.
“You have to make twice as many calls to find candidates,” said Carmen Smith, chief people officer at Coyote Logistics, a UPS subsidiary in Chicago. “The talent market is very tight.”
However, the July report showed signs that some workers were stepping back from the sidelines.
For people of the best working age, defined as 25 to 54, the participation rate – that is, those who are looking for work or work – rose from 81.7 percent to 81.8 percent. The Fed is hoping this number will climb back to its February 2020 level, which was 82.9 percent.
Ms. Smith said Coyote brought on 100 new employees in July and plans to add 300 later this year, mostly in sales, operations, marketing and finance. “We are entering our busiest season and business is looking good,” she added.
More attractive wages could be one factor in the country’s hiring surge. Average hourly wages rose 4 percent year-over-year in July, and wages for non-supervisory and production workers – which give a better view of what is happening for typical workers – rose 4.7 percent last year.
Those numbers have been skewed by who has returned to the job market and who has not, but they point in the right direction from the Fed’s perspective.
At the same time, there is a contentious debate over whether the safety net that was put in place to get unemployed workers through the pandemic may now keep them out of the labor market. Twenty-six states, all but one headed by Republicans, have decided to end a $ 300-a-week unemployment benefit allowance before it expires in September.
In the data available so far, there is little evidence that the cutoff has significantly expanded the pool of job applicants. Salman Chaudhry, general manager of five vacation rentals in Ocean Springs, Miss.
“Our number of applications has increased,†he said. “We have now found more people willing to work.”
For Mr. Chaudhry and other business owners, the Delta variant is now the largest wildcard. “We’ll see what Delta does with our business, but we haven’t seen the impact yet,” said Chaudhry. “We had some cancellations but not at the level when Covid first appeared.”
Hotel occupancy appears to have declined slightly across the country in recent weeks, according to STR, an industry research firm. And spending on Chase cards in some travel and entertainment categories has declined, JP Morgan economists Jesse Edgerton and Peter B. McCrory wrote on Friday.
“Above all, airline spending has fallen by almost 20 percent from a recent high in mid-July, a steeper decline than during the severe winter Covid wave,” wrote the economists. “On the other hand, the expenses in the catering trade have only decreased moderately and thus far less than in the winter wave.”
There is turbulence on the horizon. Events like the New York International Auto Show, due to open in Manhattan later this month, have recently been canceled. The mask requirement has also been reintroduced in many areas indoors.
Should restrictions on restaurants return or schools close again, these sectors would be badly affected. A decline in agency recruitment is also likely should cases continue to rise.
“If Delta becomes a problem, it will likely limit spending, activity and potentially hiring of people in all of the same service sectors,” said Mr. Gapen, an economist at Barclays. “There is some downside risk to it.”
Profit returned to prepandemic levels at Poor Boy Lloyd restaurant in Baton Rouge, LA, as downtown offices filled up after a year of remote working, said owner Fred Taylor. In fact, Mr. Taylor struggled to keep up with the resurgence of customers while under staffing.
But over the past week, he said, he has lost nearly 75 percent of his usual sales as cases of delta variants in the region multiplied.
Uncertainty about how the virus will progress makes it difficult to know how much to invest in hiring and training more workers, Taylor said.
“It’s difficult to work with a fluctuating income,†he said. “The costs are getting higher. The electricity will be the same, the rent will be the same, and you don’t have the money to pay it. “
Jeanna Smialek, Coral Murphy Marcos and Katie Rogers Reporting contributed.
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