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The good news for workers is that wages are still growing. Average hourly earnings remained steady this month, rising by 4.4 percent over the year, to $33.74 per hour. Fed policymakers are keeping a close eye on wage growth, because they worry that fast-rising wages will tamper with their ability to bring down inflation, which was 3 percent last month.
In July, job growth was fueled by strength in healthcare, social services, financial activities, and wholesale trade. The healthcare industry added 63,000 new jobs, with big increases in hospitals and nursing care facilities. Coming out of pandemic lockdowns, an increasingly older population has infused the health-care sector with demand for its services.
Financial services, where job growth has been slow if not flat this year, added 19,000 jobs with the largest gains in real estate and rental and leasing, offsetting job losses in commercial banking. Wholesale trade also bounced back notching 18,000 new jobs after In July, employment in wholesale trade increased by 18,000, after months of stagnation.
Employment in construction also continued to trend up, even as rising interest rates have weighed on homebuyers. Retail, manufacturing, transportation and warehousing, and the information sector, which includes tech, saw little to no growth.
The federal government is helping buoy the labor market by pouring billions of dollars into infrastructure and green energy projects. And consumers are also helping a lot, with consumer confidence in July notching a new two-year high, according to the Conference Board.
All this optimism has silenced near-term recession fears and led the Atlanta Federal Reserve to update its economic growth forecasts, suggesting GDP could soar in the third quarter to a blistering 3.9 percent, an annual rate not seen since the stimulus-fueled pandemic recovery months of 2021.
Indeed, more than a year into a sustained effort by the Federal Reserve to fight inflation by raising interest rates, employers continue to hire at a rapid pace, despite cooling in interest-rate-sensitive sectors such as tech, construction and manufacturing. Layoffs remain low and unemployment claims are trending down over a four-week period.
“What’s really stunning about what’s going on is that we’re seeing gains in some sectors offsetting losses elsewhere,” said Diane Swonk, chief economist at KPMG US. “We’ve seen layoff announcements and bankruptcies rise, but the labor market has continued on, because there are still so many job openings to fill that it is able to keep going.”
As private industry has slowed somewhat, state and local governments, which had been strapped for workers since the pandemic, have been able to hire more easily.
“The government is accounting for a larger share of job gains because with private sector hiring slowing, they finally can compete for jobs,” said Julia Pollak, chief economist at ZipRecruiter.
Heather Burke, a county child welfare worker in Westminster, Colo., had to take on responsibilities that weren’t part of her job description during the covid-19 pandemic as staffing levels plummeted in child services. This included making “intake visits” to homes to investigate allegations of child abuse that help determine whether children must be removed from their homes and go into foster care.
“I had done that job for five years in the past and it took years to recover from the trauma. Having to go back into intake was traumatic,” said Burke, who has worked for Adams County for 11 years.
Over the past year, the staffing crisis has abated some and workers have returned to their normal roles, Burke said, as the agency has since been able to fill open positions and even create new jobs. Some child welfare workers who quit during the pandemic have returned to work, in part due to winning a strong union contract, she said.
At the same time, a cash infusion from the federal government and related private investment into infrastructure and green energy projects, such as electric vehicles and airport upgrades, has been keeping the construction and manufacturing industry afloat. Under President Biden, the federal government has announced some $299 billion and sparked another $503 billion in business investments that are trickling through the economy. Last month, construction and manufacturing added 23,000 and 15,000 jobs, respectively.
“Manufacturing and construction employment would have fallen this year absent this investment, rather than just rising slowly,” Pollak said.
To be sure, there are warning signs for the labor market on the horizon. The number of people working part time for reasons beyond their control rose by 452,000 in June, the largest increase in more than three years. Meanwhile, the Black unemployment rate, which hit a record low in April at 4.7 percent, increased in May and again in June, to 6 percent. A wide body of research indicates that Black workers are the first to lose their jobs in economic downturns.
Though labor shortages across the country have eased over the past year, workers still have elevated leverage in the labor market, as has been on display in this summer’s wave of militant union activity. There are 1.5 job openings for each unemployed worker, according to a Labor Department report released Tuesday.
Some sectors are still struggling to find workers, especially with specific high-demand skill sets, such as public school science teachers and accountants.
Marie Young has been unable to fill three job openings at her accounting firm in Asheville, N.C., since January, as demand for her services has boomed.
During the pandemic, several competitor accounting firms in her area shuttered, their owners retiring, just as demand for assistance with Paycheck Protection Program loans and employee retention credits were at an all-time high. To attract talent, Young has raised wages, started covering 100 percent of employees’ health-care costs and brought on temporary workers through hiring agencies. But she’s had little luck.
“Younger people aren’t wanting to go into this business with its long hours, liabilities and the ever-changing tax laws,” said Young, who has run her business for 30 years and currently has eight accountants and bookkeepers on staff.
“Things have changed,” she continued. “People ask us constantly, ‘Can we work remotely?’ But in our industry, our clients don’t want their data going out of this building, so we say ‘Nope.’”
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