Employers added 850,000 jobs in June as hiring revved up

Hiring surged in June with employers adding a better-than-expected 850,000 jobs, the Labor Department said Friday — the latest sign that the economy is rebounding from the pandemic recession.

Leisure and hospitality led the hiring increase, with a jump of 343,000 jobs from last month as traffic at restaurants grew. Education added almost 270,000 jobs. Employment also rose in retail trade, personal and laundry services, child care centers and professional and business services.

"The acceleration in employment growth was driven by the sectors most closely affected by the continued return to normalcy," Andrew Hunter, senior U.S. economist at Capital Economics, said in a research note. 

Pay and bonuses are growing

Average hourly earnings in June jumped 3.6% year-over-year, well above the pre-pandemic rate of increase. 

With job openings at a record high in May and workers more prepared than ever to quit or change jobs, would-be employers are increasing pay, adding bonuses and offering more flexible work terms in a bid to attract job seekers.

Nonetheless, the labor participation rate was unchanged at 61.6%, well below its pre-pandemic level and a sign that workers aren't ready to flood back to the office or factory. Some 1.6 million people said they didn't look for work in June for fear of contracting the virus, though that figure dropped from 2.5 million the previous month. And 2.6 million people who were working before the pandemic have retired, the Associated Press reports.

The ranks of people who have been jobless for more than half a year grew to nearly 4 million, a bump of more than 200,000 people compared with May. 

"Overall, this report signals incremental progress in the pace of job growth, but there's no sign yet of a shift back into the labor force. The missing millions are still missing," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research note.

A deep hole for jobs

Even with June's gains — the strongest in 10 months — nearly 7 million fewer people are on payrolls today than before the pandemic.

Economists have pointed to challenges such as finding child care as major factors keeping workers out of the job market. To that end, the strong job gains in June in education should pave the way for more employment growth down the road, said Robert Frick, corporate economist at Navy Federal Credit Union.

"[G]ood employment gains for teachers will have a multiplier effect in the next few months, as that allows kids to go back to school and frees over a million parents to return to work," Frick said in a note.

Republican lawmakers, meanwhile, have blamed enhanced unemployment benefits for keeping workers on the sidelines, and more than half of U.S. states are cutting off jobless aid in the coming weeks.

The struggle to fill jobs coincides with a swiftly growing economy. In the first three months of the year, the government estimated that the economy expanded at a strong 6.4% annual rate. For all of 2021, the Congressional Budget Office estimated Thursday that growth will amount to 6.7%, making for the fastest calendar-year expansion since 1984.

The Associated Press contributed reporting.