WASHINGTON, Aug 6 - The U.S. job growth rose solidly in July amid demand in the labor intensive services industry, suggesting that the economy maintained its strong momentum at the start of the second half.
Nonfarm payrolls increased by 943,000 jobs last month after rising 938,000 in June, Labor Department said in its closely monitored employment report on Friday. Economists polled by Reuters had forecast payrolls growing by 870,000 jobs.
Job gains were, however, flattered by shifts in seasonal employment at schools caused by the COVID - 19 pandemic. Estimates ranged from as high as 350,000 to as low 1.6 million.
In June, unemployment was down from 5.4% to 5.9%.
Labor market conditions appear to be healthy at the beginning of the third quarter as labor-intensive service businesses continue to hire given strong pent-up demand, said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.
Prior to the pandemic, education employment normally closed by about 1 million schools in July as schools closed, but this year many students are in summer school catching up after disruptions caused by the coronavirus. This likely throws the model or seasonal factors that government uses to strip out seasonal fluctuations from the data, giving payrolls a boost.
Combined with the expansion of summer school programs in several large school districts throughout the country, seasonal adjustment process provided another large boost to July education payrolls, said Bullard.
The strong employment report followed on heels of news last week that the economy recovered fully in the second quarter the sharp loss in output suffered during the very brief pandemic recession. Economic growth this year is around 7%, which would be the fastest economic growth since 1984.
The health of the labor market will be important to the Federal Reserve's next monetary policy decisions.
Strong readings over the next few months appear to give the green light for a pre-announcement of tapering at the Fed's September meeting, said James McCann, deputy chief economist at Aberdeen Standard Investments in Boston.
But doubling COVID-19 infections, caused by the Delta variant of the coronavirus, pose a risk. While major disruptions to economic activity are not expected, spiraling cases could keep workers at home and hamper hiring with nearly half of the population fully vaccinated.
An inadequate supply of workers has left employers unable to fill a record 9,2 million job openings. Can affordable child care be provided without the fear of contracting Coronavirus? There have also been career changes and pandemic retirements as well as retirements.
Republicans and business groups blame the federal government, plus a $300 weekly check from the federal government, for the labor crunch. Although more than 20 states led by Republican governors have ended these federal benefits before their Sept. 6 expiration, there has been little evidence that terminations boosted hiring.
The worker shortage is expected to ease in the fall when schools reopen for in-person learning, but some economists are less optimistic, arguing that the economy was creating many low skilled jobs and there were not enough people to take them.
One of the biggest challenges faced with Emsi Burning Glass right now is roughly two-thirds of our job openings are in the kind of jobs which do not require any type of college degree, said Ron Hetrick, senior labor economist with Emsi Burning Glass in Moscow, Idaho. We have about 6 million job openings that are not requiring college degree, but we only have 3.4 million who are unemployed and don't have a college degree.