Tag Archives: Economy

U.S. consumer confidence falls to 6-month low; house prices post record gains

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence fell to a six-month low in August as concerns about soaring COVID-19 infections and higher inflation dampened the outlook for the economy.

The survey from the Conference Board on Tuesday also showed consumers were less upbeat about the labor market. They were less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of double-digit growth.

Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic. Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.

“While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.

It mirrored the University of Michigan’s survey of consumers, which showed sentiment tumbling in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID-19 cases that has been driven by the Delta variant of the coronavirus.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, slipped to 42.8 this month from 44.1 in July. This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.

Fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers, the survey showed. But the share of consumers planning to go on vacations rose, with most expecting to travel domestically and many intending to fly to their destinations. That should help to offset the drag from reduced spending on goods.

Despite the anticipated slowdown, the foundation for consumer spending remains strong, with households sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. Gross domestic product growth estimates for the third quarter are around a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter.

Stocks on Wall Street were trading mostly lower after recent strong gains. The dollar was largely flat against a basket of currencies. U.S. Treasury prices were lower.

HOME PRICES JUMP

The Conference Board survey also showed less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are sidelining some first-time buyers from the market.

Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but supply severely lagged, fueling house price growth. COVID-19 vaccinations have allowed some employers to recall workers to offices. Schools and universities have reopened for in-person learning.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index jumped a record 18.6% in June from a year ago after rising 16.8% in May. Economists, however, believe that house price inflation has peaked, with homes becoming less affordable especially for first-time buyers.

“Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market,” said Selma Hepp, deputy chief economist at CoreLogic. “Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration. Going forward, home price growth may ease off but stay in the double digits through year-end.”

A separate report from the Federal Housing Finance Agency (FHFA) showed its house price index rose a record 18.8% in the 12 months through June. House prices surged 17.4% in the second quarter compared to the same period in 2020. FHFA believes house prices peaked in June.

The FHFA index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. employment growth through March revised modestly lower

WASHINGTON (Reuters) – The U.S. economy likely created 166,000 fewer jobs in the 12 months through March than previously estimated, the Labor Department’s Bureau of Labor Statistics said on Wednesday.

The reading is a preliminary estimate of the BLS’ annual “benchmark” revision to the closely watched payrolls data. The leisure and hospitality sector, which was hardest hit by the COVID-19 pandemic, accounted for the bulk of the revision, with employment growth revised down by 597,000 or 4.6%.

Leisure and hospitality employment is 1.7 million below its peak in February 2020, though the industry has led the labor market recovery from the pandemic.

“It is somewhat ambiguous what this means for future employment in this sector beyond March 2021,” said Daniel Silver, an economist at JPMorgan in New York.

“This could suggest that more jobs need to be added to return closer to pre-pandemic levels but also that the pandemic-related hit to that sector was more severe and or longer-lasting than previously reported.”

But the transportation and warehousing sector added 247,900 more jobs than previously thought, while professional and business services payrolls were revised up by 214,000. Government employment was raised by 255,000 jobs.

Once a year, the BLS compares its non-farm payrolls data, based on monthly surveys of a sample of employers, with a much more complete database of unemployment insurance tax records.

A final benchmark revision will be released in February along with the BLS’ report on employment for January. Government statisticians will use the final benchmark count to revise payroll data for months both prior to and after March.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. consumer sentiment plummets in early August to decade low

By Evan Sully and Lindsay Dunsmuir

(Reuters) -U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade, in a worrying sign for the economy as Americans gave faltering outlooks on everything from personal finances to inflation and employment, a survey showed on Friday.

The unexpected reading could give Federal Reserve policymakers pause if it translates in the months ahead to a dent in economic activity. The central bank has been getting closer to a decision on when to begin pulling back the extraordinary stimulus it put in place to shield the economy from the COVID-19 pandemic.

The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011, and there have been only two larger declines in the index over the past 50 years. Those were at the depths of the 2007-2009 recession and during the first wave of shutdowns in April 2020 at the beginning of the pandemic.

The losses were widespread across income, age, and education subgroups and spanned all regions. Economists polled by Reuters had forecast the index would remain unchanged at 81.2.

U.S. stock market indexes slipped immediately after the report was released, while the price of gold gained ground. U.S. Treasury bond yields hit session lows.

“The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought,” said Andrew Hunter, an economist at Capital Economics.

Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic. But the recovery is showing some indication of cooling off.

COVID-19 cases have doubled in the past two weeks to reach a six-month peak as the more transmissible Delta variant spreads rapidly across the country. Labor shortages across the service sector also persist while supply chain disruptions have continued.

“The pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion…mainly from dashed hopes that the pandemic would soon end,” Richard Curtin, the survey director, said in a statement.

The survey’s gauge of current economic conditions also declined to a reading of 77.9 from 84.5 in July while its measure of consumer expectations slid to 65.2 from 79.0 in July.

The survey also showed consumers raising their expectations for medium term inflation, another measure the central bank is closely monitoring to ensure that inflation expectations remain anchored.

The survey’s one-year inflation expectation edged lower to 4.6%, down from 4.7%, but its five-year inflation outlook ticked up to 3.0% from 2.8% in July.

Consumer price increases slowed in July, the Labor Department said on Wednesday, but inflation overall remained at a historically high level amid lingering supply-chain disruptions and stronger demand for travel-related services.

(Reporting by Evan Sully and Lindsay Dunsmuir; Editing by Chizu Nomiyama)

Dollar falls as U.S. consumer price rises temper in July, data show

By John McCrank

NEW YORK (Reuters) -The dollar fell on Wednesday after U.S. inflation data showed consumer price increases eased in July, taking some pressure off the Federal Reserve to begin scaling back the monthly bond purchases that are part of its toolbox to support the economic recovery.

The dollar index, which measures the greenback against a basket of other major currencies, was down 0.17% at 92.915 at 3:05 p.m. ET (1905 GMT).

Earlier, the U.S. currency hit 93.195, its highest since April 1, and not far off of its 2021 high of 93.439, but it sold off after data showed the consumer price index rose 0.5% last month after climbing 0.9% in June. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.

Economists polled by Reuters had forecast overall CPI would rise 0.5% and core CPI 0.4%.

While prices are still rising, the Fed has said it expects inflationary pressures to moderate over time as supply catches up with demand following months of COVID-19 lockdowns.

“The CPI report was enough to cause a bit of profit taking for the U.S. dollar, but at the end of the day, it’s not a game changer for the Fed,” said Kathy Lien, managing director at BK Asset Management. “They’re still going to be announcing taper,” likely within the next six weeks.

The greenback had enjoyed a lift from last week’s better-than-expected U.S. jobs data, as well as from remarks by Fed officials about tapering bond purchases and, eventually, raising rates, sooner than policymakers elsewhere.

Looking forward, the Fed will depend on data when it comes to the timing of the dialing back of its asset purchases, said Edward Moya, senior market analyst at OANDA.

“It’s all going to be all about next month’s employment report and if that does not impress, tapering, as far September goes, might even get pushed out towards the end of the year,” he said.

In Europe, investor sentiment has declined, with a survey showing a third straight month of deterioration in Germany as rising global COVID-19 cases keep markets on edge.

“Investors have to take on board the possibility of news on Fed tapering at a time when COVID is still very apparent in various parts of the world,” said Rabobank analyst Jane Foley.

“The consequence of this is likely to be a firmer dollar,” she added, especially if the euro breaches its 2021 low.

The euro gained 0.16% against the greenback, to 1.17395, following six straight sessions of losses and having fallen as low as 1.1706 in early deals in Europe, near the year’s low of $1.1704.

Sterling gained 0.2% to 1.38645 against the dollar, pulling back from a two-week low.

The yen was up 0.12% at 110.445, after dropping for five consecutive sessions against the dollar.

South Korea reported a record number of COVID-19 cases on Wednesday, while outbreaks in China, Southeast Asia and Australia grow steadily.

The Australian dollar and the New Zealand dollar , seen as riskier currencies, rose after the U.S. CPI report, last up 0.33% and 0.5% respectively.

In cryptocurrencies, bitcoin touched $46,787.60, its highest since May 17. Bitcoin was last up 1.5% at $46,304.54, while ether, the second-biggest cryptocurrency, was up 2.7% at $3,226.18.

(Reporting by John McCrank in New York; additional reporting by Ritvik Carvalho in London; Editing by Kirsten Donovan and Marguerita Choy)

U.S. labor market powers ahead with strong job gains, lower unemployment rate

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost as it started the second half of what many economists believe will be the best year for growth in almost four decades.

The Labor Department’s closely watched employment report on Friday also showed the unemployment rate dropped to a 16-month low of 5.4% and more people waded back into the labor force. The report followed on the heels of news last week that the economy fully recovered in the second quarter the sharp loss in output suffered during the very brief pandemic recession.

“We are charting new economic expansion territory in the third quarter,” said Brian Bethune, professor of practice at Boston College in Boston. “The overall momentum of the recovery continues to build.”

Nonfarm payrolls increased by 943,000 jobs last month, the largest gain since August 2020, the survey of establishments showed. Data for May and June were revised to show 119,000 more jobs created than previously reported. Economists polled by Reuters had forecast payrolls would increase by 870,000 jobs.

The economy has created 4.3 million jobs this year, leaving employment 5.7 million jobs below its peak in February 2020.

President Joe Biden cheered the strong employment report. “More than 4 million jobs created since we took office,” Biden wrote on Twitter. “It’s historic – and proof our economic plan is working.”

Hiring is being fueled by pent-up demand for workers in the labor-intensive services sector. Nearly $6 trillion in pandemic relief money from the government and COVID-19 vaccinations are driving domestic demand.

But a resurgence in infections, driven by the Delta variant of the coronavirus, could discourage some unemployed people from returning to the labor force.

July’s employment report could bring the Federal Reserve a step closer to announcing plans to start scaling back its monthly bond-buying program. The U.S. central bank last year slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through the bond purchases.

“This is the last employment report Chair (Jerome) Powell sees before Jackson Hole, and we have to imagine that he lays the groundwork for a potential September tapering announcement,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “We think the odds continue to rise that tapering begins before the end of 2021.”

Stocks on Wall Street rose, with the Dow Jones Industrial Average and the S&P 500 index hitting record highs. The dollar jumped against a basket of currencies. U.S. Treasury prices fell.

BROAD EMPLOYMENT GAINS

Employment in the leisure and hospitality sector increased by 380,000 jobs, accounting for 40% of the job gains, with payrolls at restaurants and bars advancing by 253,000.

Government payrolls increased by a whopping 240,000 jobs as employment in local government education rose by 221,000. Education jobs were flattered by a seasonal quirk.

Hiring was also strong in the professional and business services, transportation and warehousing, and healthcare industries. Manufacturing payrolls increased by 27,000 jobs, while construction employment rebounded by 11,000 jobs. Retail trade and utilities were the only sectors to shed jobs.

Details of the smaller household survey from which the unemployment rate is derived were also upbeat. Household employment shot up by 1.043 million jobs, leading the unemployment rate to decline half a percentage point to its lowest level since March 2020.

The jobless rate, however, continued to be understated by people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the unemployment rate would have been 5.7% in July.

About 261,000 people entered the labor force, lifting the participation rate to 61.7% from 61.6% in June. The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, rose to 58.4% from 58% in June.

Even more encouraging, the number of long-term unemployed dropped to 3.4 million from 4 million in the prior month. They accounted for 39.3% of the 8.7 million officially unemployed people, down from 42.1% in June. The duration of unemployment fell to 15.2 weeks from 19.8 weeks in June.

There was also an improvement in the number of people who have permanently lost their jobs. With economic growth this year expected to be around 7%, which would be the fastest since 1984, further recovery is expected.

Faced with a record 9.2 million job openings, employers continued to raise wages to attract workers. Average hourly earnings increased 0.4% last month, with sharp gains in the hospitality industry. That followed a similar rise in June and lifted the year-on-year increase in wages to 4.0% from 3.7%.

Lack of affordable child care and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There also have been pandemic-related retirements as well as career changes. Republicans and business groups have blamed enhanced unemployment benefits, including a $300 weekly payment from the federal government, for the labor crunch.

Half of the nation’s states led by Republican governors have ended these federal benefits before their Sept. 6 expiration. Economists are cautiously optimistic that the worker shortage will ease in the fall when schools reopen for in-person learning and sustain the strong pace of hiring.

“August should be another big month, and September as well, as there are still millions who need to find work quickly,” said Chris Low, chief economist at FHN Financial in New York.

(Reporting by Lucia Mutikani; Editing by Dan Burns and Paul Simao)

Fed’s Waller: ‘Go early and go fast’ on taper

By Ann Saphir

(Reuters) – Federal Reserve Governor Christopher Waller on Monday said the U.S. central bank could start to reduce its support for the economy by October if the next two monthly jobs reports each show employment rising by 800,000 to 1 million, as he expects.

“We should go early and go fast, in order to make sure we’re in position to raise rates in 2022, if we have to,” Waller said in an interview on CNBC, adding that he could see the Fed announcing a reducing in its monthly bond purchases in September and a start to that reduction in October.

And once the Fed begins the process, Waller said, “There’s no reason you’d want to go slow on the taper, to prolong it – you want to get it done and get it over.”

The Fed is buying $80 billion in Treasuries and $40 billion in mortgage-backed securities each month to help push downward on borrowing costs and speed the recovery. It has said it will continue to make purchases at that pace until the economy makes “substantial further progress” toward the Fed’s goals of full employment and 2% inflation.

Fed Chair Jerome Powell said last week the job market recovery is still “a ways off” from the point where it would be appropriate for the Fed to start paring its bond purchases.

Speaking Friday, Fed Governor Lael Brainard echoed that sentiment, indicating in a speech Friday that she would want to have data from the September jobs report – not available until early October — to make such a decision.

To Waller, an increase of some 1.6 million to 2 million jobs in July and August would mean that the economy will have regained 85% of its job losses, Waller said. That, in his view, meets the “substantial further progress” bar for tapering.

The government is due to release its July report on Friday, and economists estimate it will show U.S. employers added about 880,000 jobs last month.

Waller’s former boss, St. Louis Fed President James Bullard, on Friday also called for the Fed to begin reducing its bond-buying by the fall.

Most on Wall Street have been expecting the taper to start late in 2021 or in 2022.

Waller said he does not believe the Delta variant of the coronavirus will “sideline” the economy. He added that while he believes the recent hot readings on inflation will subside later in the year, there’s “upside risk” to that expectation.

(Reporting by Ann Saphir; editing by Jonathan Oatis and Nick Zieminski)

China says Taliban expected to play ‘important’ Afghan peace role

KABUL (Reuters) -China told a visiting Taliban delegation on Wednesday it expected the insurgent group to play an important role in ending Afghanistan’s war and rebuilding the country, the Chinese foreign ministry said.

Nine Taliban representatives met Foreign Minister Wang Yi in the northern Chinese city of Tianjin on a two-day visit during which the peace process and security issues were discussed, a Taliban spokesperson said.

Wang said the Taliban is expected to “play an important role in the process of peaceful reconciliation and reconstruction in Afghanistan,” according to an account of the meeting from the foreign ministry.

He also said that he hoped the Taliban would crack down on the East Turkestan Islamic Movement as it was a “direct threat to China’s national security,” referring to a group China says is active in the Xinjiang region in China’s far west.

The visit was likely to further cement the insurgent group’s recognition on the international stage at a sensitive time even as violence increases in Afghanistan. The militants have a political office in Qatar where peace talks are taking place and this month sent representatives to Iran where they had meetings with an Afghan government delegation.

“Politics, economy and issues related to the security of both countries and the current situation of Afghanistan and the peace process were discussed in the meetings,” Taliban spokesperson Mohammed Naeem tweeted about the China visit.

Naeem added that the group, led by Taliban negotiator and deputy leader Mullah Baradar Akhund, was also meeting China’s special envoy for Afghanistan and that the trip took place after an invitation from Chinese authorities.

Asked about the Taliban visit, U.S. Secretary of State Antony Blinken said in New Delhi that it was a “positive thing” if Beijing was promoting a peaceful resolution to the war and “some kind of (Afghan) government … that’s truly representative and inclusive.”

“No one has an interest in a military takeover by the Taliban, the restoration of an Islamic emirate,” he said in an interview with CNN-News18 television.

Security in Afghanistan, with which China shares a border, has been deteriorating fast as the United States withdraws its troops by September. The Taliban has launched a flurry of offensives, taking districts and border crossings around the country while peace talks in Qatar’s capital have not made substantive progress.

“(The) delegation assured China that they will not allow anyone to use Afghan soil against China,” Naeem said. “China also reiterated its commitment of continuation of their assistance with Afghans and said they will not interfere in Afghanistan’s issues but will help to solve the problems and restoration of peace in the country.”

(Reporting by Kabul bureau; Additional reporting by Beijing bureau; Editing by Kevin Liffey, William Maclean and Grant McCool)

Factbox: Latest on the worldwide spread of the coronavirus

(Reuters) – The EU is on course to hit a target of fully vaccinating at least 70% of its adult population by the end of summer, given that same percentage of over-18s has now already received a first dose, the European Commission said.

DEATHS AND INFECTIONS

EUROPE

* Ireland became the latest European Union member state to commit to offering COVID-19 vaccines to children aged 12-15 as it opened its strongly subscribed program to 16 and 17-year old’s.

* Greece said children aged 12-15 could be vaccinated with Pfizer/BioNTech and Moderna shots.

ASIA-PACIFIC

* Tokyo’s 2,848 COVID-19 infections are the highest tally that the Olympic host city has reported since the pandemic began, officials said, as media reported that authorities had asked hospitals to prepare more beds for patients, with the Delta variant driving the surge.

* India will meet its target of supplying more than half a billion COVID-19 vaccine doses to its states by the end of this month, the health ministry said, but added not all doses may be administered by then.

* Moderna has pushed back its late-July vaccine shipment schedule for South Korea to August due to supply problems that will also affect other countries awaiting its shots, South Korean health officials said.

* Australia’s Victoria state will lift a strict lockdown, while neighboring New South Wales faces an extension of restrictions after daily new cases spiked to a 16-month peak.

AMERICAS

* The Centers for Disease Control and Prevention (CDC) is set to announce revised mask guidance for fully vaccinated Americans in the wake of rising COVID-19 cases.

* Argentina’s government has signed a deal with U.S. pharmaceutical company Pfizer to acquire 20 million doses of vaccines to be delivered this year, Health Minister Carla Vizzotti told reporters.

MIDDLE EAST AND AFRICA

* Saudi Arabia will impose a three-year travel ban on citizens travelling to countries on the kingdom’s ‘red list’ under efforts to curb the spread of coronavirus and its new variants, state news agency SPA said.

* Nigeria expects to take delivery of 29 million doses of Johnson & Johnson vaccine in August, allowing it to ramp up its vaccination program just as a third wave of infections takes hold, the health minister said.

* Israel is considering giving a third shot of the Pfizer/BioNTech vaccine to its elderly population even before FDA approval to help fend off the Delta variant.

MEDICAL DEVELOPMENTS

* Antibodies triggered by Sinovac Biotech’s vaccine decline below a key threshold from around six months after a second dose for most recipients, although a third shot could have a strong booster effect, according to a lab study.

* Russia has given the green light for clinical trials combining a shot from AstraZeneca and Britain’s Oxford University with Russia’s Sputnik V vaccine to go ahead.

* Moderna is in talks with U.S. regulators to expand the size of an ongoing trial testing its vaccines in children aged between five and 11.

ECONOMIC IMPACT

* World stocks fell after investors sold Chinese internet giants for a third straight day, while real U.S. bond yields hit record lows on worries about the economic outlook ahead of a Federal Reserve meeting.

* The International Monetary Fund maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for a number of developing countries struggling with surging COVID-19 infections.

(Compiled by Veronica Snoj and Ramakrishnan M.; Editing by Grant McCool, Maju Samuel, Sriraj Kalluvila and Gareth Jones)

PM Bennett seeks to energize Israeli economy by slashing regulations

By Steven Scheer

JERUSALEM (Reuters) – Israeli Prime Minister Naftali Bennett, a former software entrepreneur, pledged on Tuesday to slash regulations to cut the cost of living and help Israel’s small and medium-size businesses flourish as well as its globally successful hi-tech sector.

“We want to ‘hi-tech-icise’ the rest of the economy,” he told a news conference. “We’re going to turn ourselves into a paradise for small and medium businesses … to make it easy and compelling to open a business and succeed.”

Bennett, who took office last month, took a swipe at his predecessor Benjamin Netanyahu, saying Israel had endured 12 years of talk and “minimal execution”.

Finance Minister Avigdor Lieberman said there were 209 regulators in Israel, and that they acted mainly in their own interests instead of aiming to improving productivity, competition and growth.

He pointed to a 2018 report by the Organization for Economic Cooperation and Development which said that reducing the level of regulation to the OECD average would increase Israel’s per-capita GDP by 3.75% in five years, and 5.75% – 75 billion shekels ($23 billion) – over a decade.

A report by the prime minister’s office and finance and justice ministries says Israel’s per capita GDP and productivity have lagged Western peers for a decade due to over-regulation.

Under a framework law, the government plans to establish a single authority to oversee regulatory processes, and to factor speed of processing, competitiveness and pricing into corporate regulations.

($1 = 3.2630 shekels)

(Reporting by Steven Scheer; Editing by Kevin Liffey)

U.S. companies hire more workers; signs labor crunch may be easing

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in June, offering tentative signs that a worker shortage could be starting to ease as companies raise wages and offer incentives to entice millions of unemployed Americans sitting at home.

The Labor Department’s closely watched employment report on Friday also showed just over 150,000 people entered the labor force last month. The report suggested the economy ended the second quarter with strong growth momentum, following a reopening made possible by vaccinations against COVID-19.

Still, employment gains remained less than the million or more per month that economists and others had been forecasting at the beginning of the year.

“This may be a sign that some of the temporary labor shortages holding back the employment recovery are starting to ease,” said Andrew Hunter, a senior U.S. economist at Capital Economics.

Nonfarm payrolls increased by 850,000 jobs last month after rising 583,000 in May. That left employment 6.8 million jobs below its peak in February 2020. Economists polled by Reuters had forecast payrolls advancing by 700,000 jobs. There are a record 9.3 million job openings.

The leisure and hospitality industry added 343,000 jobs, accounting for 40% of the employment gains in June. More than 150 million people are fully immunized, leading to pandemic-related restrictions on businesses and mask mandates being lifted. Government employment jumped by 188,000 jobs, driven by state and local government education. End of school year layoffs were fewer relative to the previous year.

Manufacturing added a modest 15,000 jobs. Factories are struggling with rampant worker shortages as well as scarce raw materials, which are forcing some to cut production.

Construction payrolls contracted again last month. Though the sector remains supported by robust demand for housing, expensive lumber is hampering homebuilding.

Politicians, businesses and some economists have blamed enhanced unemployment benefits, including a $300 weekly check from the government, for the labor crunch. Lack of affordable child care and fears of contracting the coronavirus have also been blamed for keeping workers, mostly women, at home.

There have also been pandemic-related retirements as well as career changes. Economists generally expect the labor supply squeeze to ease in the fall as schools reopen and the government-funded unemployment benefits lapse but caution many unemployed will probably never return to work.

Record-high stock prices and surging home values have also encouraged early retirements.

U.S. stocks opened higher on the data. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

WAGES RISING

Average hourly earnings rose 0.3% last month after gaining 0.4% in May. That raised the year-on-year increase in wages to 3.6% from 1.9% in May. Annual wage growth was in part flattered by so-called base effects following a big drop last June.

According to job search engine Indeed, 4.1% of jobs postings advertised hiring incentives through the seven days ending June 18, more than double the 1.8% share in the week ending July 1, 2020. The incentives, which included signing bonuses, retention bonuses or one-time cash payments on being hired, ranged from as low as $100 to as high as $30,000 in the month ended June 18.

Some restaurant jobs are paying as much as $27 per hour plus tips, according to postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry. The federal minimum wage is $7.25 per hour, but is higher in some states.

With employment not expected to return to its pre-pandemic level until sometime in 2022, rising wages are unlikely to worry Federal Reserve officials even as inflation is heating up because of supply constraints. Fed Chair Jerome Powell has repeatedly stated he expects high inflation will be transitory.

The U.S. central bank last month opened talks on how to end its crisis-era massive bond-buying.

Though the unemployment rate rose to 5.9% from 5.8% in May, that was because 151,000 people entered the labor force. The jobless rate continued to be understated by people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the unemployment rate would have been 6.1% in June.

(Reporting by Lucia Mutikani; Editing by Dan Burns, Chizu Nomiyama and Andrea Ricci)