High number of positions added, wages increase
The job market in the United States is showing strong signs again, after a long pandemic year.
The U.S. economy added 850,000 jobs in June, and average wages rose 3.6% from the previous year, according to the Labor Department.
The monthly jobs report showed the strongest job gain since August. The 850,000 additional jobs reportedly exceeded economists’ expectations, compared to May’s 583,000 jobs gain and April’s 269,000 new jobs.
That being said, the unemployment rate rose 0.1%, to 5.9%, which could be due to the growing number of job seekers re-entering the labor market. However, the economy remains 6.8 million jobs short of the number of jobs it had in February 2020, according to The Associated Press.
Dr. Peter Rupert, a professor of economics at UCSB and the director of the UCSB Economic Forecast Project, said the numbers reflected pretty much what he predicted.
“The report was great,” he told the News-Press Friday. “Things have really been moving up. Leisure and hospitality is one of the largest sectors that’s been steadily coming back: 300,000 roughly a month for the last four to five months, just like we thought it should come back. That’s my view.”
The economist did say, though, that he noticed a “slight wrinkle” to the report — the average work week declined by 0.1 hour, from 34.8 to 34.7 hours. Dr. Rupert said that while it doesn’t seem like a big deal, dropping the average by 0.1 and multiplying it by 150 million means “that’s a lot of decline in hours.”
He explained that many returning to the workforce took lower-hour jobs, which could mean the jobs are more temporary, or they just have fewer hours.
Regarding the slight increase in unemployment, the economics professor said this is the trouble with the statistics, because they could indicate positive or negative trends.
“It depends on why. If there’s unemployment because people lost their jobs, that’s a bad thing. But if there’s more unemployment because everybody believes the jobs are plentiful and start coming out of the woodwork looking for jobs, that’s a good thing,” Dr. Rupert said.
The economist believes the latter is occurring in this case, considering the labor force extended by 151,000 people.
“People have gone from not in the labor force to into the labor force, and typically, you wouldn’t do that if you thought the labor market was so bad you’d never get a job,” he said.
The wage increase slightly surprised Dr. Rupert, he said, because a high number of people are coming back to lower-paying occupations, so he expected the average to fall. However, he said that he and other economists have heard that the labor shortage has caused many firms to increase wages to recruit employees — they’re paying more bonuses and higher wages overall.
In addition, in order to hire a new employee, the trends show that businesses can’t get new employees at the same rate.
He described this trend as a “very positive sign for the labor market,” and a “win-win situation.”
Locally, Dr. Rupert said Santa Barbara County and the state of California probably have numbers even better than the nation’s, because the region relies so heavily on tourism, and that’s where jobs are coming back quickly.
He referenced the recent move by United Airlines to buy 270 new planes in a gamble on the future of travel.
“They believe travel is going to come back hard,” the UCSB professor said.
Furthermore, he said those in the travel industry believe business travel will not return as strong as it was pre-pandemic, due to the increase in teleworking and virtual capabilities. However, they also believe recreational and tourism travel could meet or even exceed pre-pandemic levels.
“I do expect to see a partial increase in tourism travel,” Dr. Rupert said. “Santa Barbara wasn’t a big conference destination anyway, so we didn’t really rely much on conferences compared to Las Vegas or Atlanta or other places. We rely on and see a lot more tourists travel, and with Southwest coming in, I think all these things point to a really strong labor market going forward for the next year.”
In conclusion, the economist said that because of the pandemic, the country has never been in a position like this before, with such huge and sudden declines.
“Almost every month is kind of a surprise in one way or another — who would have thought we’d have a labor shortage?” he said. “I think overall, we’re coming back as I would have expected to come back, not all in one fell swoop, but slowly over time … I’m optimistic about the next year, given there’s no recession, of course.”