Saturday, April 1, 2023

Partisan fight over US labour market jolted by strong hiring data


Joe Biden sought to portray strong gains in employment last month as a verdict on his economic policies, saying the months-long debate over why hiring had not picked up despite robust US growth was now settled.

The US labour department on Friday said 850,000 jobs had been created in June, well above economists’ expectations and surpassing the upwardly revised 583,000 gain posted in May and an unexpectedly weak 278,000 new hires in April.

The disappointing levels of hiring in April and May prompted a fierce partisan debate over Biden’s Covid stimulus programme, with Republicans arguing that overgenerous unemployment benefits were incentivising workers to stay on the sidelines.

Dozens of Republican-led states cut off the supplemental benefits, arguing it would force workers back into a labour market as many service-sector employers are struggling to hire.

But Biden said Friday’s strong non-farm payroll figures, which included a 0.3 per cent gain in average hourly earnings from May, was proof hiring and wages were both on the rise. On a year-over-year basis, earnings have increased 3.6 per cent.

“The strength of our recovery is helping us flip the script,” Biden said after the jobs numbers were published. “Instead of workers competing with each other for jobs that are scarce, employers are competing with each other to attract workers.”

But Republicans remained sceptical. Kevin Brady, the top Republican on the tax-writing House ways and means committee, insisted that “workers [are] still on the sidelines”, and argued that “prices are rising faster than wages”.

Still, analysts expressed optimism over the figures, saying the gains in both jobs and wages were more in line with what would be expected in a strong recovery — unlike the April figures, which caught many of them by surprise.

“It was a solid report, [one] you would hope for given the reopening has continued to gather pace,” said Lee Ferridge, head of macro strategy for North America at State Street Global Markets.

US equity markets rallied on the data, with the S&P 500 closing up almost 0.8 per cent to another record high. The bond market also signalled its approval, with 10-year Treasury yields trading marginally lower as investors showed less fear over inflation.

Despite the increase in payrolls — the largest in 10 months — the unemployment rate ticked up slightly to 5.9 per cent from 5.8 per cent the month before.

The June report landed at a critical juncture for the US economy. Easing lockdown measures and generous government stimulus programmes have fuelled a robust rebound in economic growth this year. US consumer prices have in turn surged as supply chain constraints have hampered some businesses’ ability to meet red-hot consumer demand. 

Crippling labour shortages have also hamstrung employers. While some businesses blame Biden’s enhanced unemployment benefits for holding up the jobs recovery, there has also been evidence childcare constraints and fears about catching Covid-19 dissuade people from returning to the workforce.

Companies have begun raising wages and handing out perks to attract new hires. Friday’s report suggested those measures have balanced some of the labour market mismatches.

Hiring in the leisure and hospitality sector was particularly strong, with 343,000 jobs created for the month. Average hourly earnings jumped for these workers, with 2.3 per cent month-over-month gains for those in non-supervisory positions. Retailers also revved up hiring, filling 67,000 new jobs. Other sectors including public and private education and professional and business services saw improvements.

Construction was one of the “surprising weak spots” last month, said Thomas Simons, an economist at Jefferies, especially in light of the booming US housing market. The number of jobs in the sector fell 7,000 in the third straight month of declines. He attributed the drop to a “worker availability issue more than anything else”.

The labour force participation rate, which tracks the number of Americans either employed or looking for a job, held steady in June at 61.6 per cent. It has remained stuck below 62 per cent since last year.

“It does play into the narrative that there is a block of workers that haven’t re-entered the labour force this summer,” Ferridge said.

The strong jobs report helped to bolster the case made by a cohort of US central bankers that the Federal Reserve should begin to consider withdrawing its monetary policy support as it closes in on “substantial further progress” towards averaging 2 per cent inflation and achieving full employment. That has long been the threshold for any adjustment to the Fed’s $120bn monthly asset purchase programme.

Despite June’s gains, US employment remains far below its pre-pandemic levels. More than 9m people are still unemployed, compared to 5.7m in February 2020.

Latest coronavirus news

Follow FT’s live coverage and analysis of the global pandemic and the rapidly evolving economic crisis here.

Source link


Please enter your comment!
Please enter your name here



Related Stories