By Joe Higgins, Quest 4 Quality
- America added 850,000 jobs in June with wages up 3.6 percent.
- The Consumer Confidence Index jumped from 120.1 to 127.3, nearing pre-pandemic levels from one year ago.
- Jobless claims hit their lowest level in 21 years, at 364,000 last week.
The U.S. economy appeared to be firing on all cylinders in June.
Hiring was robust last month as employers added 850,000 jobs, marking the largest gain in nearly a year and a providing strong indication that the labor market is in full recovery mode. The unemployment rate, however, rose to 5.9 percent as more Americans began looking for work again. As an adjunct to the Labor Department report, the Congressional Budget Office said the economy was on track to recover all the jobs lost in the pandemic over the next 18 months.
As the supply of workers remained scarce, high demand pushed wages up 3.6 percent over last year, representing the largest hourly increase in the past decade. Nevertheless, it appears that labor will remain in short supply. Workers are now more selective in the jobs they take and are also holding out for better pay and working conditions.
By my reckoning, we exceeded economists’ employment expectations by 130,000 jobs, so job creation is positive and will continue to be so throughout the summer and into next year. The Federal Reserve was looking for hires to hit the one million level, and while we missed that milestone, I believe we are headed for a very rapid rebound.
Over the next few months, the fastest growing segment of labor will be in leisure and hospitality. These employees were hit the hardest when the pandemic was still in its infancy and will now enjoy strong employment growth in the second half of the year.
For anyone who is hiring this year, Labor Department surveys show that Americans are looking for jobs that allow them to work from home, either fulltime or with the occasional office visit. Telecommuting took root during the pandemic, when some businesses were closed and employees were reluctant to work in close proximity to colleagues for fear of contracting COVID.
More than half of the respondents also said they would accept flexible hours.
To put the first six months of 2021 into perspective, vaccinations are up, states have reopened their economies, the retail business is better than ever, and our future in a post-pandemic world is looking good. Gross domestic product (GDP) is growing faster than at any time in the past 30 years, with a 6.4-percent gain in the first quarter and estimates for Q2 at 7.9 percent.
It should therefore come as no surprise that consumer confidence hit its highest level since last March. The Conference Board, which produces the Consumer Confidence Index, reported an increase from 120.1 in May to 127.3 in June, exceeding economists’ expectations of 118.7. The Index now sits nearly at February 2020’s pre-pandemic level of 132.6.
A ten-point increase in June is significant and signals that we are in a new phase of our recovery. May itself saw a nearly 40-point increase over the year-ago
Why is this important for your business? Simple: Consumer spending is 74 percent of all economic activity, and companies spending in response to consumer demand is comprises another 8 percent. If consumers are confident in both their current situation and their future, they spend.
Americans’ optimism about the next six months increased, as they see their financial future improving for the balance of the year. The one concern in the June report was consumer expectations for higher inflation, but nevertheless they are still planning to buy furniture, electronics and appliances.
There was some more good news on the employment front last week, as new claims for unemployment benefits dropped to a 21-year low, with layoffs declining rapidly amid major labor shortages. For the week of June 26, initial claims fell 51,000 to a seasonally adjusted 364,000 as reported by the Labor Department.
I thought we were finally through with the virus, but it seems like it just keeps hanging on. As I write this article, the Delta variant that has been plaguing India, is present in every state in the U.S., and comprises nearly 30 percent of all new COVID-19 cases in our country — up from 3 percent just a month ago. This is a developing story that I will continue to track.
The Bottom Line
Over the next six months more consumers will begin spending their money on services like travel, hotels, dining and all the other niceties they have avoided over the past year. This trend toward services is reflected in the June unemployment report, with the leisure and hospitality sector seeing the most growth by far of any employment category.
That does not mean that furniture, appliances and electronics will suffer. With home equity at record levels, the stock market at historic highs, personal savings accounts flush, credit at a low point and remodeling surging, your businesses will continue to grow.
Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.