U.S. Job Gains Surge to 850,000 as Businesses Work to Fill Record Number of Open Roles
Summer is in full swing with demand for goods and services through the roof, and hiring is starting to surge again. With 9.3 million jobs open, employers have been scrambling to attract talent since the second quarter began, trying to seize new revenue and growth opportunities.
Job creation in April and May at 269,000 and 583,000, respectively, failed to meet economists’ expectations, though the labor market has kicked into higher gear this month with 850,000 jobs added. The question is whether the momentum will continue.
Numbers recently released by the Commerce Department show business investment in nondefense capital goods are at all-time highs and consumers are shifting spending back to in-person services, such as dining and travel. Home price growth is extremely strong, and the economy is showing widespread, sustainable growth.
Will companies be able to add the talent they need to achieve business goals?
The Talent Demand
The hiring demand has existed for months, but multiple factors have created a logjam. Fortunately, some of these issues will soon be resolved.
Half of U.S. states will end additional unemployment benefits by July 10. While it is not the only factor delaying a faster return to pre-pandemic employment levels, it is having an impact. Early signs point toward declining unemployment totals where the additional $300 weekly payments end early. Under the federal stimulus plan, benefits will be in place for the remaining states until September 6.
More than 1.3 million open jobs were in the accommodations and food services sector, otherwise known as hotels and restaurants. Many of these jobs offer pay rates equal to or below that of full unemployment benefits. Given the rise in consumer demand, a boost in job gains is expected in this industry and particularly in states where the additional benefits are ending this summer.
Early in the pandemic, many workers hesitated to switch jobs due to uncertainty in the economy, but the latest reports show those fears have largely subsided. More employees are now voluntarily leaving their current role, which is a trend to watch. It’s a candidates’ market in which companies are offering above-market compensation to attract top-tier talent for high-skilled roles, making it a very competitive environment.
Remote work, whether full-time or on a limited basis, will continue to shape the workplace, as more businesses announce plans to return to the office. More candidates now than before the pandemic are basing employment decisions on whether remote or more flexible work-from-home arrangements are available. Some companies are segmenting candidate supply faster based on the need for a flexible schedule or remote work, which has added friction to the hiring process, impacting organizations that plan to return to full-time, in-office work schedules.
Will remote or hybrid work demands start to subside? While this is a factor limiting the candidate pool for some businesses, not all workers are against returning to the office. Businesses will need to decide what works best for their employees and organizational growth. As fear of the virus wanes, more workers may be willing to return to the office, and for others, rejoin the labor force. As we all get used to what looks like the world we used to know in our personal lives, we should see a translation to our professional lives.
Jobs Recovery Outlook
With news headlines focused on the potential rise of the COVID delta variant, the near-term outlook could become cloudier if another spike in virus cases occurs. Overall, the job market is expected to remain strong, especially if more workers rejoin the labor force over the summer months.
July’s jobs report could show how big of a role the additional unemployment stimulus benefits have had in slowing the pace of recouping lost jobs, particularly when the metro-level data is released. Until then, watch the weekly unemployment claims reports for insights.
ThinkWhy’s talent intelligence software, LaborIQ®, predicts more than 73 million hires to occur in 2021 from a combination of recapturing lost jobs, adding new jobs, and employees moving between jobs. However, there is still disruption in the talent acquisition process. With labor shortages and tight supply across the U.S., compensation demands are on the rise for blue– and white-collar roles. Now is a critical time for businesses to refine compensation plans, considering the competitiveness of the job market. Recruiting and hiring will require the right tools to source and win candidates.
It has been two years since most people were able to take a true summer vacation, and travel has picked up quickly in recent months. As workers take extended time off this season, another hiring slowdown may occur. Whether it is hiring managers, talent acquisition professionals, candidates or others involved in the hiring process, anticipate a lot of out-of-office replies as we get back to a semblance of normalcy.
Not All Job Gains Are Equal
As the nation marches toward a full job recovery in 2023, the losses experienced during the pandemic and rebound have been uneven across geographies. From a pure volume perspective, the following metro areas added the most jobs back to the labor market, in the first five months of 2021. Of note, many of these labor markets were among the hardest hit by the pandemic.
*Of note, metro data through June will be available July 16, 2021.*
Conversely, not every city has experienced a surge in job gains in 2021. The list below details which metro areas have lost jobs in 2021.
Although these metros are slower out of the gate in 2021, they should be in positive job gain territory by year's end.
Industry Performance & Recovery Outlook
June’s jobs report indicates the service-based economy is bouncing back. Consumer demand and business investment have swelled — signs of improved job prospects and employment, with the summer travel season underway. This is good news for Leisure and Hospitality, which was anemic for much of the past year.
Residential housing demand finally shows signs of cooling, as Construction lost 7,000 jobs. Manufacturing, along with Trade, Transportation and Utilities sectors, continue to suffer from material and labor shortages, now paired with rising commodity and fuel prices.
Talent acquisition professionals in these industries will face different challenges sourcing in-demand occupations and from broader industry impact.
Below are details when LaborIQ expects to see pre-pandemic employment levels return in each major sector and factors impacting the ongoing and lopsided recovery.
Construction | Residential construction spending, a key driver in the industry’s growth, slowed from previous months. Much of the new home supply that spurred residential construction came from new builds. Though lumber prices recently dropped significantly, much of the drop was a reversal of inflation from earlier in the year. A growing focus on returning to workplaces, building infrastructure and leisure activities could spur investments. Potential recovery risks include stagnant, nonresidential developments and a decline in renovation projects that were popular during lockdowns.
Financial Activities | This sector is the closest to its pre-pandemic employment levels. Although spending on goods dropped in May, U.S. consumer activity, propelled by big-ticket purchases throughout 2020 and into 2021, drove growth. High earners have been more willing to take on debt, given more secure employment, low interest rates and cash from stimulus. Now, harder-hit industries – such as rental and leasing (car rentals and commercial and industrial machinery equipment) – will likely see growing demand, as consumer and business activities pick up.
Healthcare | Occupations in this industry have the lowest unemployment rates. Demand for healthcare workers will remain strong. Technology has only improved the feasibility of virtual, telehealth and home healthcare options. LaborIQ expects healthcare to recover early in hard-hit markets, like New York. The pandemic has also brought heightened awareness to patients’ wholistic healthcare needs, including mental health services.
Professional and Business Services | This industry’s unemployment rate remains below the U.S. average, signaling a tighter job market. Even during the worst parts of the recession, fewer workers were laid off in this industry. Now, given a brighter economic outlook, many workers may change jobs to for higher compensation, a promotion or simply to find flexible remote-work opportunities.
Trade, Transportation and Utilities | When it comes to goods, healthy consumer demand and business investment are benefiting trade industries, which then rely on transportation services to move those items. However, a lack of available goods and labor within the supply chain has become this industry’s bottleneck toward recovery. Conversely, passenger movement has jumped significantly, and summer will only boost demand. Risks to the outlook include labor and material shortages, high crude prices, and rising wages and business costs.
Manufacturing | High demand paired with labor and material shortages, along with increasing commodity prices, is limiting growth in this industry. The Institute for Supply Management® Manufacturing PMI®, which measures order activity at U.S. factories, slipped in June to 60.6 from May’s PMI® of 61.2. A measure above 50 indicates expansion, though material shortages keep this industry from maximizing its potential.
Information | The pandemic increased spend on technology and drove growth in software publishing. An increasing hybrid workforce will continue to drive business investment in technology and growth within the industry. In-home entertainment and a resumption of in-person entertainment will boost industries like motion picture and sound recording. Risks to the outlook will depend heavily on viewer behaviors.
Government | Government spending could be consequential. Pending legislation, such as the Biden administration’s infrastructure investment, could impact agencies at the national and local levels. Another indicator to watch is how state and local governments leverage federal aid to resume services. Overall, this industry’s recovery could arrive faster, given the plans for higher spending.
Leisure and Hospitality | As anticipated, consumers have transitioned their consumption patterns from goods to services, as the economy has reopened. No industry will benefit more from this change than restaurants and hotels that were completely closed a year ago. Business growth will be limited for those who are not able to hire talent fast enough to satisfy the booming summer demand. Wages have increased, as businesses try to entice workers back to the labor force. Restaurants and hotels whose core offering served business travelers will lag and face challenges during the work week. Vacation hotspots will need to hire workers quickly to meet resurging demand. Recovery for this industry will vary widely based on metro, with some recovering well before 2025.
Mining and Logging | In June, operable capacity for refineries surpassed pre-pandemic levels for the first time. Oil prices have reached highs last seen in 2018, as the appetite for road trips and air travel resume and demand for freight services remain high. LaborIQ expects employment in this sector to improve, as economic activity causes producers worldwide to increase production.
LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.