Friday’s jobs report beat expectations, showing the economy tacked on another 372,000 jobs in June — but the robust showing was still a sobering reminder of how much inflation is gnawing at workers’ paychecks.
Wage growth in June generally didn’t keep pace with inflation, according to government data. One sector where it did, leisure and hospitality, generally offers below-average wages and still hasn’t added back all of the jobs it lost during the pandemic, the Bureau of Labor Statistics noted.
The June jobs report showed average hourly pay rising to $32.08. That’s a 0.3% rise from May, and a 5.1% increase from last June, the agency said.
Make no mistake, the 5.1% gain is significant in the context of the last decade. From 2012 to February 2020, average hourly earnings were growing in the roughly 2% to 3% range per year.
But consider that current inflation rates — like the Consumer Price Index that showed an 8.6% increase from May 2021 to May 2022 — are at a four-decade high. Then there’s the Federal Reserve’s preferred inflation gauge, which showed a 6.3% annualized increase for May.
The health care sector, along with professional and business services were two of the sectors fueling Friday’s jobs numbers. In both instances, hourly pay increase rates didn’t keep up.
Health care, which added 57,000 jobs over the month, falls under the auspices of education and health services in the wage data. Average hourly earnings in the category rose 6%. The June 2022 average hourly wage was $31.72. There are 176,000 fewer jobs in the sector compared to pre-pandemic levels.
Professional employment climbed 74,000 jobs and the average hourly wage of $38.62 was a 5.8% yearly increase, the data showed. There’s 880,000 more jobs in this white-collar category compared to February 2020.
Transportation and warehousing added 36,000 jobs and the pay increased to $27.86, a 5.3% rise.
And then there’s leisure and hospitality. Running into the summer months, with many people willing to pay more for the season’s fun, the sector was another big driver in the June jobs numbers. Bars, restaurants, hotels and more added 67,000 jobs.
Average hourly pay reached $20.16 last month, marking a 9.1% year-over-year increase in wages. Still, the amount of jobs was down 1.3 million, 7.8%, from pre-pandemic levels, the Bureau of Labor Statistics said.
In May, the sector had 1.57 million job openings out of the economy’s approximate 11.3 million openings, the Bureau of Labor Statistics said earlier this week.
The latest jobs numbers may ease some fears of a recession for now, even though a separate survey showed troubling signs that fewer people are working. In a certain way, wildly growing wages during hot inflation is not a good thing because it can create what economists call a “wage-price spiral,” where salaries and prices keep pushing each other upward.
“Obviously, a tight labor market increases the threat of a wage-price spiral, but these more modest wage increases in the past several months suggest policy makers may dodge that bullet,” Mike Schenk, chief economist at the Credit Union National Association, said Friday.
The abstract economics still make for difficult realities for many families. Four in 10 people (42%) said they were struggling to stay where they were financially, according to a Monmouth University poll released Tuesday. It was the largest percentage since pollsters started asking the question five years ago. One-third said inflation was the biggest concern facing their family now, the poll also found.
The latest job numbers come as the Fed considers how much to keep raising key interest rates to curb inflation. During previous rate hikes, Fed Chairman Jerome Powell has said the economy is strong enough to handle higher interest rates and steeper borrowing costs.
“Nothing in the report suggests the Federal Reserve will waver from its commitment to aggressively raise rates in an effort to tamp down inflation expectations,” Schenk said.
