What’s going on with the U.S. jobs market, and could it impact the holiday selling season?
The jobs data is sending a mixed message about the labor front, although growth in the U.S. does appear to be slowing.
First-time jobless claims unexpectedly rose to 373,000 for the week ended July 3, versus consensus estimates by economists in the 350,000 range. The Department of Labor said on Thursday that it revised up the prior week’s level by 7,000 to 371,000 from 364,000. So far, the U.S. has two straight weeks with dismissals on the rise.
The jobless data followed a report last week that nonfarm employers added 850,000 jobs in June, above the estimate of 706,000 for the month. And continuing claims fell 145,000 from the prior week’s level to 3.34 million. Both data points should be relatively good news for the jobs picture.
But continuing claims data are a week behind the report for first-time filers for unemployment benefits. And even though employers added 850,000 jobs in June, the unemployment rate rose higher to 5.9 percent, slightly above the expected 5.6 percent rate. Moreover, the rise in first-time benefits comes at a time when the economy is supposedly heating up as Americans are out shopping again due to a post-Covid spike called pent-up demand.
There have been reports all spring about a tight labor market, with employers posting “help wanted” signs and—particularly for the service sector—even offering per-hour pay increases plus other incentives as many positions still go unfilled. On top of that, the Labor Department’s Job Openings and Labor Turnover Summary, released in early June, showed that 4 million people handed in their resignations in April. A large percentage of those who decided to quit their jobs were working in retail. Also high on the list were workers in the transportation sector and in warehousing.
That means that not only do fashion firms and retailers have to endure supply chain bottlenecks on goods from overseas due to either container or port issues, they also have headaches getting the goods from point A to point B once they arrive.
Related Stories
According to information from JoTo PR Disruptors, qualified truck drivers continue to age out or retire, contributing to a national supply chain crisis impacting all sectors across the nation. The struggle to fill driver seats also leads to higher costs and longer wait times for consumers.
The trucking industry is responsible for about 70 percent of the freight volume that’s moved across the U.S. The American Trucking Association (ATA) refers to trucking as the “linchpin of the U.S. supply chain.”
ATA CEO Chris Spears in testimony before the Subcommittee on Surface Transportation in May spoke about the need for better infrastructure. He also noted that the industry faces a severe and widening truck driver and diesel technician shortage, threatening the ability to keep goods moving on time to their destinations. On top of the freight bottlenecks and congestion on the National Highway System, there is a shortfall of nearly 61,000 drivers. Spear said the industry will need to hire about 1.1 million new drivers over the next decade to keep pace with anticipated freight demands.
Economists generally believe that the labor market will right itself once the additional federal unemployment benefits are cut off at summer’s end, forcing people to pound the pavements as they hunt for jobs.
But there may be other forces at work that could further complicate the big picture.
A Centers for Disease Control and Prevention moratorium on evictions is set to end on July 31. Emergency bans by states on evictions have varying timetables. In New York City, a moratorium for commercial tenants will end on Aug. 31. That means retailers, such as apparel chains, that haven’t paid their rents since the start of Covid may elect to close up shop before landlords are able to begin eviction proceedings. Along with store closures will be the additional loss of jobs. Plus, many consumers also could be facing evictions from their homes. In California, landlords can begin to evict residential tenants who haven’t been paying rent beginning on Oct. 1, although there are also specific provisions that could extend the deadline through March 2022.
As a service economy, consumer spending is closely watched because it accounts for 70 percent of U.S. economic activity. And the jobs front is a big factor in spending because consumers with jobs are more willing to open their purse strings.
Consumers able to shelter-in-place during Covid as they worked from their homes saved from by eating at home and not spending on a daily commute. But even with a high savings rate, Craig Johnson, president of data research firm Customer Growth Partners, is concerned about retail sales in the back half of this year.
“Labor shortages, supply chain bottlenecks, and consumer resistance to rising prices may also pressure sales for the second half of 2021,” he said. And if Covid variants make consumers stick closer to home again, these issues could combust during the upcoming holiday season.