Will we see job market fireworks before the 4th of July? It is quite possible, given the dramatic improvements in high-frequency indicators of economic activity over the last month.
We expect to see a strong jobs report that shows the economy adding around 750k jobs in June, about half of them in leisure and hospitality, and the unemployment rate falling to 5.6%. We also expect to see labor force participation tick upwards slightly, even as wage growth and working hours remain high.
Rising demand for services increased employer demand for labor
Between the reference weeks of the May and June jobs reports, economic activity has expanded substantially, boosting demand for services. For example:
- Weekly airport passenger throughput rose by 1.8 million or 17%, according to data from the Transportation Security Administration (TSA).
- Movie box office sales rose about 3-fold from $30 million to $88 million, according to data from Box Office Mojo.
- There was a steep increase in mobility, according to data on Apple maps inquiries for GPS directions.
- Hotel occupancy rates rebounded substantially, according to data from analytics service STR.
- Restaurant dining went from being down 20% relative to 2019 levels to being down just 10%, according to data from OpenTable.
The increase in activity translated into a surge in employer demand for workers. For example, the average number of active online job postings across the U.S. rose by 2.2 million or 15%, according to ZipRecruiter estimates.
Progress in the fight against Covid-19 may translate into increased labor force participation
The big question many people hope the jobs report will answer is whether workers are returning to the labor market. One reason to expect some positive movement in the labor force participation is the extent to which the pandemic has abated in the U.S. over the past month.
Between the reference weeks of the May and June jobs reports, the number of Americans who were fully vaccinated against Covid rose by 25.6 million or 22%, with much of the increase among working-age people. The number of daily Covid cases fell by about two thirds, from around 35K to around 13K, according to data from the Centers for Disease Control (CDC).
We are not likely to see much effect in the report of the early cancelation of enhanced unemployment benefits in some states. The jobs report survey preceded those policy changes.
While generous pandemic unemployment benefits paired with concerns about workplace health and safety, child care challenges, and transportation costs continue to prevent some people from returning to work, their influence is likely fading. For many jobless Americans, the recent improvement in the number and range of job opportunities available and the attractive wages and working conditions being offered are reason enough to start looking again and venture back into the workforce.