By PAUL WISEMAN
WASHINGTON (AP) — Inflation is raging. The stock market is tumbling and interest rates rising. American consumers are depressed and angry. Economists warn of potentially dark times ahead.
But employers? They just keep hiring.
The Labor Department reported last week that America’s dinged and dented economy managed to add a vigorous 372,000 jobs in June, well above the 275,000 that economists had expected. And the unemployment rate remained at 3.6%, just a tick above the 50-year low that was recorded just before the coronavirus pandemic flattened the economy in early 2020.
“The labor market’s continued strength is simply astonishing, despite all the headwinds new hiring faces,″ said Christopher Rupkey, chief economist at the research firm FWDBONDS LLC, dismissing concerns that the economy might headed for a downturn sometime soon. “This isn’t what a recession looks like.″
The American job market has staged a remarkable comeback from the depths of the COVID-19 recession in the spring of 2020: In March and April that year, the United States lost a staggering 22 million jobs.
But the government’s vast infusions of spending, including expanded unemployment benefits and relief checks to most households and ultra-low interest rates set by the Federal Reserve, fueled a propulsive recovery. Employers added a record 6.7 million jobs last year. And they’ve been tacking on an average of 457,000 a month more so far in 2022.
The nation is now just 524,00 jobs short of the number it had in February 2020, just before COVID erupted. Counting last month’s hiring, in fact, the private sector has regained all the jobs it lost to the pandemic recession. The remaining shortfall resides entirely on government payrolls.
The strong recovery does have a downside: It has fueled the hottest inflation in 40 years. And the Fed will likely see June’s hiring spree as another reason to keep aggressively raising its benchmark short-term interest rate as it did in March, May and June to try to tame inflation. Higher rates will probably weaken the economy because they will make loans steadily more expensive for consumers and businesses.
Here are five takeaways from the June jobs report:
HIRING: STRONG BUT SLOWING
“The recent numbers usually would be consistent with a raging economic boom,″ noted Ian Shepherdson, chief economist at Pantheon Macroeconomics. But hiring has lost some momentum. From April through June, employers added an average 375,000 jobs a month, down from an average of 539,000 in the first three months of 2022 and a monthly average of 562,000 last year.
What’s more, in its employment report Friday, the government said hiring was weaker during the spring than it had originally estimated. Its revisions lopped a combined 74,000 jobs from April and May payrolls.
PAY RAISES ARE GETTING SMALLER
Average hourly wages rose 0.3% from May to June and 5.1% over the past year. The year-over-year gain was the lowest since December. And it wasn’t nearly enough to keep up with the 12-month jump in consumer prices, which reached a 40-year high of 8.6% in May.
Economists Sarah House and Michael Pugliesi of Wells Fargo said the Fed’s policymakers would likely welcome “the tepid rise in earnings″ because it might ease concerns that rising pay would fuel ever-higher prices, far above the central bank’s 2% target. At the same time, the economists cautioned that decelerating pay gains are “another blow to households grapping with the highest inflation in more than a generation.″
And as households lose purchasing power to higher prices, they may slash their spending, which typically accounts for about 70% of the economy’s output.
MANUFACTURING JOBS ARE BACK
American factories added 29,000 jobs last month, restoring manufacturing payrolls to nearly 12.8 million, just above pre-pandemic levels.
Locked in at home during the pandemic and sitting on savings from relief checks and in some cases lower commuting costs, consumers have been eagerly buying up manufactured goods — everything from appliances to lawn furniture to cars. The Institute for Supply Management, a trade group of purchasing managers, says its manufacturing index has signaled growth for 25 straight months, although it dipped in June.
But factory boom may not last. Higher interest rates are raising borrowing costs. More expensive loans, in turn, could slow demand for factory goods and drive up the value of the U.S. dollar, which makes American-made products more expensive in foreign markets.
HELP WANTED AT RESTAURANTS, BARS AND HOTELS
As the COVID-19 threat recedes — or seems to — consumers have been shifting their spending away from manufactured goods and toward the services they had to forgo while hunkered down at home. Restaurants, bars and hotels, devastated in the early days of the pandemic, are now on a hiring spree. Eating and drinking establishments added nearly 41,000 jobs last month. Hotels tacked on nearly 15,000. Payrolls in both businesses, though, remain well below pre-pandemic levels.
Leisure and hospitality companies, including hotels, restaurants and bars, raised hourly wages 9.1% last month from a year ago, staying ahead of inflation, and 1% from May — three times the average month-over-month private-sector pay hike.
BLACK UNEMPLOYMENT DIPS
The unemployment rate for Black Americans dropped to 5.8% last month from 6.2% in May. At 21.2 million, the number of Black Americans in the labor force — which includes those either working or looking for work — tops pre-pandemic levels, though the figure dipped from May.
The number of whites in the labor force is 1.4 million short of where it stood in February 2020. White unemployment ticked up to 3.3% from 3.2% in May. Hispanic joblessness was unchanged at 4.3%.
In June, the percentage of Black Americans who either had a job or were looking for one — the so-called labor force participation rate — was 62.2%, down from 63% in May but exceeded the participation rate for whites (61.9% in June) for a third straight month.