MANHATTAN (CN) — The first six months of 2021 could have been better, but investors are hard-pressed to complain too much, netting double-digit percentage gains in all three major U.S. indices.
Since January 4, the Dow Jones Industrial Average has gained nearly 14% in value, while the S&P 500 and Nasdaq gained almost 16% and 13.6%, respectively. While corporate earnings and the newest stimulus package have driven most of those gains, lately investor optimism has been nudged along by rosier jobs data.
On Friday morning, the Bureau of Labor Statistics reported that the labor market jumped 850,000 in June, about 150,000 higher than many had predicted. The unemployment rate rose to 5.9%, above the expectation it would fall to 5.6%.
Following the news, the Dow gained 154 points on Friday to close out the week up more than 1%. The S&P 500 and Nasdaq gained 1.7% and 2% for the week, respectively.
Leisure and hospitality represented nearly half the total gains, coming in with a 343,000 increase, though the industry is still down 2.2 million jobs from February 2020 before Covid-related lockdowns took effect. Some sectors, such as wholesale trade, mining and manufacturing, remained relatively unchanged from May to June.
In remarks at the White House following the announcement, President Biden took a victory lap, noting during the first five months of his presidency more than 3 million jobs have been created. “This is historic process, pulling our economy out of the worst crisis in 100 years,” he said. “Put simply, our economy is on the move, and we have Covid-19 on the run.”
Buried within the good news, however, is the bad indicator that the number of long-term unemployed — or those without a job for more than 26 weeks — increased by 233,000 last month after a 431,000 decline in May. Long-term unemployed represent 42% of the total unemployment picture, according to BLS.
Generally, Wall Street was pleased with the news. The report “paints a picture of a steadily recovering jobs market,” wrote Lydia Boussour, lead U.S. economist at Oxford Economics, adding that “the return to a pre-Covid environment won’t happen overnight and we should be prepared for labor demand and labor supply to be bumpy in the second half of the year as the economy gradually returns to a new post-pandemic normal.”
She predicted a “jobs boom” in the coming months as hiring catches up with labor demand. “We foresee a couple of +1 million monthly job gains this summer, which should allow the economy to recoup over 8 million jobs this year, with the unemployment rate falling to 4.3% by year-end,” she wrote.
Former top Obama administration economic adviser Jason Furman, now a senior fellow at the Peterson Institute for International Economics, also sees the jobs data as promising, even if the economy remains short 9 million jobs from before the pandemic. “Looking forward there is room for continued rapid job growth, particularly if the rate of unemployed workers taking jobs rises to more normal rates over time,” he wrote.
Others remain in a holding position. “While the number is a decent improvement on the May non-farm payrolls number of 583,000, it still doesn’t tell us too much about the overall state of the U.S. labor market in terms of how quickly those U.S. workers who have dropped out of the workforce since February last year are likely to come back,” wrote Michael Hewson, chief market analyst at CMC Markets.
Andrew Hunter, senior U.S. economist at Capital Economics, agrees, noting that “with the labor force rising by just 151,000 and still more than 3 million below its pre-pandemic peak, we aren’t entirely convinced that this is the start of a much stronger trend.”
Friday’s positive jobs report was presaged on Wednesday, when ADP reported in its monthly jobs report that the private sector gained 692,000 non-farm jobs in June. The gains were almost entirely in the service sector — one of the hardest-hit industries during the pandemic — which gained 624,000 positions last month. Of that number, more than half were in the leisure and hospitality space. Construction, mining and manufacturing picked up the remainder of the month’s increase, with 68,000 jobs gained.