MNI REALITY CHECK:US Hiring Capped, Wages Up on Labor Shortage

U.S. hiring accelerated in June as vaccine uptake fueled further business re-openings and increased mobility, but a limited labor pool is still holding back even stronger job gains, industry experts told MNI, forcing many employers to raise hourly wages and salaries in an attempt to bring back workers that are still sitting out.

"For the most part, it's just a continuation of trends we've seen in the past," Indeed Economist Nick Bunker said of June hiring. "There are lots of employers out there who are looking to ramp up hiring, but the big question right now is 'is there a ready supply of workers to take those jobs?'"

Demand for workers spiked again in June, with job postings on Indeed up roughly 33% over pre-pandemic February 2020, with Bunker noting a "fairly big jump" in postings in the last week of June. That demand won't be reflected in Friday's numbers though, as the Bureau of Labor Statistics' report only captures hiring through the middle of the month.

Postings for positions in human resources "accelerated" in June, he said, a sign that "employers are looking to staff up and bring in people to help them add more employees."

But despite strong demand, available workers were still hard to come by for many employers through June, Bunker said, and incentives like hiring bonuses and better benefits were offered to bring hesitant individuals back to work.

Roughly 2.3% of postings on Indeed in early June used terms like 'hiring urgently,' 'urgent hiring' or 'immediate start,' he said. Those employers were more likely to ask workers to do their jobs in person, and demand was mostly concentrated in sectors like personal care, childcare, driving, and construction.

BUILDERS BLOCKED

Construction firms in particular struggled to hire through the month, said Frank Fiorille, vice president of risk, compliance, and data analytics at U.S. payroll provider Paychex, and the construction jobs index in the group's monthly small business employment report saw the largest decline in June, falling 0.63%. That's likely tied to ongoing supply chain disruptions, he said.

Meanwhile, hiring in leisure and hospitality surged, Fiorille said, with that index up 1.22% over May. Leisure and hospitality wages also accelerated through the month, up 7.39% from last June. Overall, weekly earnings were up 2.33% from a year earlier and hourly earnings were up 2.8%, he said, citing Paychex's proprietary data.

"Those kinds of businesses are having to raise wages to get people to come back, and it looks like it's working," he said, but added that "there's still a lot of room to grow."

SHORTAGES

Manufacturers also offered higher pay through the month to attract more workers, National Association of Manufacturers Chief Economist Chad Moutray told MNI, and NAM members expect wages to climb 3.3% over the next 12 months.

Moutray said he expects manufacturing employment to grow between 25,000 and 50,000 on Friday, and trouble finding qualified workers is holding back stronger gains.

Total nonfarm payrolls are expected to grow by 711,000 in June, according to Bloomberg, following May's slightly disappointing 559,000 gain. There is some potential for an upside surprise, with forecasts on the upper end of the spectrum calling for an increase of just over 1 million jobs. A closely watched St. Louis Fed model projected an increase of 1.5 million jobs in June, though that index has overpredicted employment increases in recent months.

The unemployment rate should fall to 5.6% from 5.8% in May, according to Bloomberg, and hourly earnings are projected to grow 0.4%. From a year earlier, wages should increase 3.6% following May's 2% gain.