Tag Archives: pandemic recession

U.S. labor market powers ahead with strong job gains, lower unemployment rate

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost as it started the second half of what many economists believe will be the best year for growth in almost four decades.

The Labor Department’s closely watched employment report on Friday also showed the unemployment rate dropped to a 16-month low of 5.4% and more people waded back into the labor force. The report followed on the heels of news last week that the economy fully recovered in the second quarter the sharp loss in output suffered during the very brief pandemic recession.

“We are charting new economic expansion territory in the third quarter,” said Brian Bethune, professor of practice at Boston College in Boston. “The overall momentum of the recovery continues to build.”

Nonfarm payrolls increased by 943,000 jobs last month, the largest gain since August 2020, the survey of establishments showed. Data for May and June were revised to show 119,000 more jobs created than previously reported. Economists polled by Reuters had forecast payrolls would increase by 870,000 jobs.

The economy has created 4.3 million jobs this year, leaving employment 5.7 million jobs below its peak in February 2020.

President Joe Biden cheered the strong employment report. “More than 4 million jobs created since we took office,” Biden wrote on Twitter. “It’s historic – and proof our economic plan is working.”

Hiring is being fueled by pent-up demand for workers in the labor-intensive services sector. Nearly $6 trillion in pandemic relief money from the government and COVID-19 vaccinations are driving domestic demand.

But a resurgence in infections, driven by the Delta variant of the coronavirus, could discourage some unemployed people from returning to the labor force.

July’s employment report could bring the Federal Reserve a step closer to announcing plans to start scaling back its monthly bond-buying program. The U.S. central bank last year slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through the bond purchases.

“This is the last employment report Chair (Jerome) Powell sees before Jackson Hole, and we have to imagine that he lays the groundwork for a potential September tapering announcement,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “We think the odds continue to rise that tapering begins before the end of 2021.”

Stocks on Wall Street rose, with the Dow Jones Industrial Average and the S&P 500 index hitting record highs. The dollar jumped against a basket of currencies. U.S. Treasury prices fell.

BROAD EMPLOYMENT GAINS

Employment in the leisure and hospitality sector increased by 380,000 jobs, accounting for 40% of the job gains, with payrolls at restaurants and bars advancing by 253,000.

Government payrolls increased by a whopping 240,000 jobs as employment in local government education rose by 221,000. Education jobs were flattered by a seasonal quirk.

Hiring was also strong in the professional and business services, transportation and warehousing, and healthcare industries. Manufacturing payrolls increased by 27,000 jobs, while construction employment rebounded by 11,000 jobs. Retail trade and utilities were the only sectors to shed jobs.

Details of the smaller household survey from which the unemployment rate is derived were also upbeat. Household employment shot up by 1.043 million jobs, leading the unemployment rate to decline half a percentage point to its lowest level since March 2020.

The jobless rate, however, continued to be understated by people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the unemployment rate would have been 5.7% in July.

About 261,000 people entered the labor force, lifting the participation rate to 61.7% from 61.6% in June. The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, rose to 58.4% from 58% in June.

Even more encouraging, the number of long-term unemployed dropped to 3.4 million from 4 million in the prior month. They accounted for 39.3% of the 8.7 million officially unemployed people, down from 42.1% in June. The duration of unemployment fell to 15.2 weeks from 19.8 weeks in June.

There was also an improvement in the number of people who have permanently lost their jobs. With economic growth this year expected to be around 7%, which would be the fastest since 1984, further recovery is expected.

Faced with a record 9.2 million job openings, employers continued to raise wages to attract workers. Average hourly earnings increased 0.4% last month, with sharp gains in the hospitality industry. That followed a similar rise in June and lifted the year-on-year increase in wages to 4.0% from 3.7%.

Lack of affordable child care and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There also have been pandemic-related retirements as well as career changes. Republicans and business groups have blamed enhanced unemployment benefits, including a $300 weekly payment from the federal government, for the labor crunch.

Half of the nation’s states led by Republican governors have ended these federal benefits before their Sept. 6 expiration. Economists are cautiously optimistic that the worker shortage will ease in the fall when schools reopen for in-person learning and sustain the strong pace of hiring.

“August should be another big month, and September as well, as there are still millions who need to find work quickly,” said Chris Low, chief economist at FHN Financial in New York.

(Reporting by Lucia Mutikani; Editing by Dan Burns and Paul Simao)

U.S. job growth improves; desperate employers raise wages to attract workers

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers increased hiring in May and raised wages as they competed for workers, with millions of unemployed Americans still at home because of childcare issues, generous unemployment checks and lingering fears over COVID-19.

Though the pickup in job growth shown in the Labor Department’s closely watched employment report on Friday missed economists’ forecasts, it offered some assurance that the recovery from the pandemic recession remained on track.

Growth is being supported by vaccinations against COVID-19, massive fiscal stimulus and the Federal Reserve’s ultra-easy monetary policy stance. April’s nonfarm payrolls count, which delivered about a quarter of the new jobs economists had forecast, caused handwringing among some analysts and investors that growth was stagnating at a time when inflation was rising.

“There are still a lot of people unemployed, but there does not seem to be a lot of eagerness to work,” said Chris Low, chief economist at FHN Financial in New York. “There would have been many more hires if employers could find more people.”

Nonfarm payrolls increased by 559,000 jobs last month. Data for April was revised higher to show payrolls rising by 278,000 jobs instead of 266,000 as previously reported.

That left employment about 7.6 million jobs below its peak in February 2020. Economists polled by Reuters had forecast 650,000 jobs created in May. About 9.3 million people were classified as officially unemployed last month. There are a record 8.1 million unfilled jobs.

At least half of the American population has been fully vaccinated against the virus, according to data from the U.S. Centers for Disease Control and Prevention.

That has allowed authorities across the country to lift virus-related restrictions on businesses, which nearly paralyzed the economy early in the pandemic. But the reopening of the economy is straining the supply chain.

Millions of workers, mostly women, remain at home as most school districts have not moved to full-time in-person learning. Despite vaccines being widely accessible, some segments of the population are reluctant to get inoculated, which labor market experts say is discouraging some people from returning to work.

Government-funded benefits, including a $300 weekly unemployment subsidy, are also constraining hiring. Republican governors in 25 states are terminating this benefit and other unemployment programs funded by the federal government starting next Saturday.

These states account for more than 40% of the workforce. The expanded benefits end in early September across the country. That, together with more people vaccinated and schools fully reopening in the fall, is expected to ease the worker crunch.

Labor Secretary Marty Walsh said the argument that enhanced benefits were discouraging job seeking was not supported by what workers were telling him.

“Working people across America are eager to work,” said Walsh in a statement. “But workers also told me about the challenges they and their families face, finding affordable childcare, caring for elderly parents and grandparents”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

WILLING WORKERS IN SHORT SUPPLY

Average hourly earnings rose a solid 0.5% after shooting up 0.7% in April. That raised the year-on-year increase in wages to 2.0% from 0.4% in April. Wages in the leisure and hospitality sector jumped 1.3%, the third straight month of gains above 1%.

Postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry, are showing restaurants offering as much as $30-$35 per hour for lead line cooks.

Sustained wage growth could strengthen the argument among some economists that higher inflation could last longer rather than being transitory as currently envisioned by Fed Chair Jerome Powell. A measure of underlying inflation tracked by the Fed for its 2% target accelerated 3.1% on a year-on-year basis in April, the largest increase since July 1992.

Still, most economists do not expect the U.S. central bank to start withdrawing its massive economic support anytime soon.

“The data will likely reinforce the view of most Fed officials that progress has not been ‘substantial’ enough for them to start signaling tapering,” said Jim O’Sullivan, chief U.S. macro strategist at TD Securities in New York.

The average workweek held steady at 34.9 hours. That together with strong wage gains lifted an income proxy 0.9%, matching April’s gain. This bodes well for consumer spending, which could also get a powerful tailwind from the more than $2.3 trillion in excess savings amassed during the pandemic.

Economists are sticking to their forecasts for double-digit growth this quarter.

Last month’s increase in hiring was led by the leisure and hospitality industry, which added 292,000 jobs, with restaurants and bars accounting for 186,000 of those positions. Local government education employment rose by 53,000 jobs as the resumption of in-person learning and other school-related activities in some parts of the country continued.

Manufacturing payrolls increased by 23,000 jobs. But construction employment decreased by 20,000 jobs.

The unemployment rate fell to 5.8% from 6.1% in April. The drop was in part due to more jobs created and 53,000 people dropping out of the labor force. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the unemployment rate would have been 6.1%.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.6% from 61.7% in April.

“It appears like employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Soaring lumber prices reverberate through U.S. housing market

By Stephen Culp

NEW YORK (Reuters) – Skyrocketing lumber prices threaten to thwart the momentum of the U.S. housing market, which for months has been one of the brightest stars of the recovery from the pandemic recession.

At the onset of the health crisis, “the mills stopped producing,” said Dustin Jalbert, senior economist and lumber industry specialist at Fastmarkets in Burlington, Massachusetts. “As soon as they saw 20 million unemployed, they shut down production.”

But COVID turned out to be a boon for the sector. Demand for low population density and home office space spiked, with historically low mortgage rates acting as an accelerant.

Surging demand pushed housing inventories to record lows. Homebuilders got to work, and lumber producers have struggled to catch up, which might take some time. Meanwhile, lumber prices have jumped more than 300% year-on-year to record highs.

“The logging operation, the shipping of the logs to the mill, the shipping of the finished product, getting workers back on the job, it’s not like flipping a switch to bring those back online,” Jalbert said.

With lumber prices sky high and a slim supply of housing stock, median home prices of existing homes jumped by a record-breaking 17.2% last month.

The chart below shows lumber prices and inventories over the last two years, along with various housing indicators home prices, residential construction spending, building permits and homebuilder sentiment:

While homebuilder sentiment remains optimistic, as indicated by the National Association of Homebuilders’ (NAHB) Housing Market index, headwinds due to rising building costs have pulled the index down from recent highs.

“The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials,” wrote Robert Dietz, chief economist at NAHB.

On Thursday, homebuilder DR Horton Inc reported its quarterly profit nearly doubled, and said on its earnings call that lumber prices might see some relief as mills re-open and the international trade picture improves.

Pultegroup is due to report on April 27, while Lennar Corp and Toll Brothers Inc are expected to post results on May 5 and 25, respectively.

In the meantime, “the builders’ margins have done fine,” Jalbert added. “What does that tell us? The costs are being passed on to the homebuyer.”

Whether those costs will dampen demand is an open question, but a report from the Commerce Department released on Thursday showed sales of newly constructed U.S. homes jumped by 20.7% last month to an annualized rate not seen since 2006, the zenith of the housing bubble.

The stock market appears to be looking beyond current price surges.

 

Lessons of hunger: pandemic prompts fresh thinking, new players in U.S. food aid

By Christopher Walljasper and Donna Bryson

CHICAGO (Reuters) – On a recent morning in Chicago’s Southwest side, young workers hefted boxes of food into vans for delivery. Borders staked out by rival gangs prevented many hungry people from visiting the New Life Centers’ food distribution site. So workers brought the food to them.

A year ago, food had a small role at New Life Centers, a church and community outreach program that works to defuse gang tensions. Since June 2020 however, the organization has partnered with local food banks and donors to provide food to around 6,000 families each week. It will continue the stepped-up effort even when the pandemic is over, finding that food delivery opens doors for conflict-resolution workers.

“That’s how relationships get built,” said Paulino Vargas, New Life Centers’ street outreach program manager.

The United States, the world’s richest country, had pockets of hunger before the pandemic put millions of people out of work last year. But now the problem has intensified in urban and rural areas where residents do not have consistent access to nutritious food. Demand at Feeding America, a national network of food banks, rose by 60% during the pandemic.

Even as the U.S. economy recovers with government stimulus and falling COVID-19 cases, hunger worsens. The Congressional Budget Office in February predicted the number of Americans using food stamps to buy food would peak at 44 million in 2022, up from 36.8 million pre-pandemic, before starting to decrease in 2023.

In the past, food security was mainly the concern of food banks and food pantries, but now all kinds of community organizations and other groups are getting involved – from anti-violence workers in Chicago to New York City probation officers. Meanwhile, food pantries nationwide have changed in ways that will continue post-pandemic.

Working with partners such as the Food Bank for New York City, the New York probation department has in recent months increased from once to three times a week the number of days the Nutrition Kitchen food pantries it runs are open and plans to continue the longer hours after the pandemic. The department sees the food pantries as a way to address recidivism as well as to help the wider community.

“People can’t get back on their feet if they’re hungry,” said Steve Cacace, who as director of the probation department’s Community Resource Unit leads the pantry project.

The department also will keep turning to people on parole to help out at the pantries. In some cases, as when Eric Burks started packing boxes of food and tracking the numbers of people served at a Nutrition Kitchen in his home borough of Queens, it can help people complete community-service hours.

“I finished my community service, I started coming back every day,” Burks said. After a day in which he might help serve more than 200 people at the pantry, he uses a shopping cart to deliver food to neighbors who are unable to make the trip to the Nutrition Kitchen.

In Chicago, New Life Centers’ executive director, Matt DeMateo, has seen an opportunity for young people to be empowered “as givers.”

When her college transitioned to online learning during the pandemic, Diana Franco, 20, dropped out and poured more time into volunteering at New Life Centers. With government grants and private donations, the center hired 15 new employees to manage food aid, including Franco as food distribution coordinator.

‘A PAYCHECK AWAY’

It is not just in big cities that people have risen to the challenge of hunger in a pandemic.

Schoolteacher Courtney Walker helps run a food pantry with her family in Atwood, a village of about 1,000 in southern Illinois. Walker said her pantry at Atwood First Baptist, working with partners such as the Eastern Illinois Foodbank, served about 60 families a month before the pandemic and more than 100 by last summer.

Her husband Tim, a mechanic, said Atwood families regularly drive 40 miles (64 km) to stock up at a full-service grocery store on items they cannot obtain at their local Dollar General store. People on fixed incomes in Atwood cannot always afford the gasoline. The pandemic recession, Tim Walker said, revealed how many were “a paycheck away from not being able to afford three meals a day.”

The Walkers started pre-packing boxes of food to limit contacts that could have spread the coronavirus. They are eager to return to allowing people to browse the pantry shelves as if they were in a grocery store, which they say is more dignified.

But in Wisconsin, the Walworth County Food Pantry said it will continue contactless delivery. Giving pre-packed boxes of food to cars is more hygienic and efficient and requires fewer volunteers than having people crowd in to indoor facilities, employees said.

In Denver, the organization that runs one of the city’s largest pantries is calling for more direct cash payments from the federal government to allow people to shop for themselves in stores, moving away from a model that largely relies on food that might otherwise go to waste being distributed to the needy by food pantries.

“We’d like to cut ourselves out of the equation,” said Teva Sienicki, CEO of the Denver pantry organization Metro Caring.

The Biden administration’s stimulus plan includes payments of $1,400 for eligible Americans as well as periodic payments in the second half of the year in the form of an expanded child tax credit.

Sienicki said putting “cash in people’s pockets” allows them to buy items like diapers or toothpaste that are not covered by food stamps.

Pantries such as Metro Caring’s can support people after an emergency, Sienicki said. But she questioned how efficiently, effectively and fairly they can serve large numbers of people who could take years to recover from the pandemic recession.

(Reporting by Christopher Walljasper in Chicago and Donna Bryson in Denver; Writing by Donna Bryson; Editing by Caroline Stauffer and Matthew Lewis)