Happy days are here again!

The new jobs report shows a growing recovery

After disappointing jobs reports for the past couple of months, the June Employment Situation Summary beat expectations by almost 150,000 jobs. The two previous reports had missed estimates and shown fewer jobs created, calling the strength of the recovery into question.

Despite the gain of 850,000 new jobs in June, the unemployment rate remained stable at 5.9 percent and the labor force participation rate was unchanged at 61.6 percent. But this isn’t necessarily a bad thing. The report notes that voluntary job-leavers, often people who quit their old job in order to move to a new and better one, increased by 164,000 to 942,000. The number of people employed part-time due to economic reasons also decreased, indicating that workers whose hours had been cut were returning to full-time.

The downside is that the number of long-term unemployed increased. This may mean that employers are favoring people who have maintained some sort of employment when looking for new hires. This might well be a reflection of employer judgment about work ethic and dependability as well as concerns about the health of applicants who have been out of work for more than 27 weeks.

The June job gains were largest in the hospitality industry, which includes both restaurants and hotels, and education. Professional services and retail also posted healthy gains, but all four categories are still below their February 2020 levels.

Average wages rose by 10 cents to $30.40 due to the strong demand for labor while the average workweek declined by 0.1 hour to 34.7.

We have a long way to go to complete the recovery, but the economy is moving in the right direction. Jobs are being recreated and the specter of inflation seems to be diminishing. A recent White House tweet trumpeted a Farm Bureau finding that the cost of a Fourth of July barbecue is cheaper than last year. The difference is small but considering the fears of rising costs that have been pervasive over the past few months and the depressed demand in 2020, the news is significant.

But that’s not all. Earlier this week, CNBC reported that the “breakeven rate,” the difference between Treasury yields and inflation-indexed bonds of the same duration, has been declining in June after rising in May. The breakeven rate is a popular measure of inflation.

“To us, this signals that markets are starting to give up on the idea of structurally higher US inflation,”  Nick Colas of DataTrek Research said. “Looking into the back half of 2021, this may well be the single most important data point to watch.”

Rising prices will be present in some segments of the economy as companies reconfigure from a pandemic footing back to business as usual. Supply constrictions may cause some price spikes, such as those being experienced by General Mills and the auto industry, but it now seems as though broad inflation is unlikely.

The strong but not off-the-chain jobs report lends credence to this theory as well. The job market indicates the economy is growing but is not overheated. This could set the stage for a period of slow, steady growth.

I’ve long predicted that we would experience an economic boom as we exit the pandemic. Pent-up demand and surging job growth should combine to restore much of what was lost to the COVID-19 recession. It looks as though we are entering that period now.

As they sang back in the days of FDR, it appears that happy days are here again.

It’s no secret that I’m not a fan of Ron DeSantis, but I want to give him credit where credit is due. The Florida governor recently complimented President Biden on his assistance in the aftermath of the building collapse.

This may not be appreciated by the Republican base, but for the majority of the country that wants the parties to get along and be sane, it’s a positive step.


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