Five takeaways from the June jobs report

The employment report for June showed the labor market heating up as the summer began with employers adding 850,000 jobs.

While it wasn’t a pre-Fourth of July fireworks show, Friday’s numbers from the Labor Department showed the U.S. economic recovery from the coronavirus pandemic accelerating with a long road still ahead.

Here are five big takeaways from the June jobs report.

Job gains are picking up at crucial time for Biden

President Biden finally has a strong jobs report to point to after three months of underwhelming employment gains and rising concern about inflation imperiling his economic agenda.

Job growth hasn’t reached the 1 million-plus monthly gains that many economists expected by now, but the June report clearly showed the U.S. moving faster toward a full recovery.

“This is historic progress, pulling our economy out of the worst crisis in 100 years, driven in part by our dramatic progress in vaccinating our nation and beating back the pandemic, as well as other elements of the American Rescue Plan,” Biden said in remarks from the White House after the jobs report was released.

“Put simply, our economy is on the move and we have COVID-19 on the run,” he added.

While one jobs report won’t be enough to cement Biden’s agenda, it could prove useful in ongoing negotiations over infrastructure spending, the debt ceiling, and other areas where Republicans are eager to seize on signs of a slowing recovery.

Service industry is driving job growth

Much of June’s job gains came in industries that were hit hardest by COVID-19 and have seen rising demand in recent months.

The leisure and hospitality sector led all industries with a gain of 343,000 jobs, with 190,000 from restaurants and bars alone. Employment in the industry is still down roughly 13 percent from February 2020 — the most of any sector, according to Indeed — making it a crucial barometer of the recovery.

Daycare centers also added 25,000 jobs, an encouraging sign for the economy at large given how many parents were pushed out of the labor force because they lacked child care options.

“This combination of job generation and workers returning is a good thing and illustrates that the growing confidence of those looking for work at higher wages is well-placed,” said RSM chief economist Joe Brusuelas, adding that the leisure and hospitality gain “should ease fears that government policy is inhibiting the return of workers to the labor force.”

Pandemic-related constraints appear to be easing

June saw a substantial decrease in the amount of people who were kept from full-time work for reasons related to COVID-19, including health concerns and child care responsibilities.

The number of Americans last month who said a COVID-19 related reason prevented them from looking for work dropped to 1.6 million, down from 2.5 million in May. The number of people working part-time when they’d prefer to work full time also fell, by 644,000 to 4.6 million.

Declines in both groups point toward more people being able to rejoin the workforce at a time when businesses are scrambling to fill openings that will meet demand. Even so, it wasn’t enough to bolster the labor force participation rate or bring enough workers off the sidelines to reverse two troubling trends.

Size of labor force stalling as long-term unemployment increases

The labor force participation rate has been stuck between 61.4 and 61.7 percent for a year now and June was no exception. The percentage of eligible workers either employed or seeking jobs came in at 61.6 percent last month and the employment-to-population ratio remained at 58 percent.

Economists expect both to increase as the U.S. gets further along in the recovery and schools fully reopen, freeing up more parents to rejoin the workforce. But another 233,000 Americans fell into long-term unemployment last month, which could hinder their return to the workforce.

“Many people who lost jobs at the start of the pandemic have been unemployed ever since. As jobs come back they will get work but there is still a big jobs deficit,” said Heidi Shierholz, policy director at the left-learning Economic Policy Institute, in a Twitter thread.

Recovery still has ample room to grow

The June jobs report was a welcome improvement from several months of less-than-stellar gains, but a critical question is whether the labor market will keep accelerating. The U.S. is still down nearly 7 million jobs from February 2020 and millions more if you count jobs the economy would have added but for the pandemic.

But economists are optimistic about the trajectory for 2021. For example, the International Monetary Fund now sees the world’s largest economy growing by 7 percent this year, up from an April projection for 4.1 percent.

“There’s quite a bit of damage left to repair, but today’s report suggests that we may rebuild sooner rather than later,” Nick Bunker, economic research director at Indeed, wrote on Friday.