Wages grew strongly in June as employers tried to attract employees by paying more, a new U.S. jobs report showed Friday, the latest evidence that workers have the power to demand more in the reopening economy.
Average hourly earnings climbed by 3.6 percent in the year through June and 0.3 percent over the month, matching what economists in a Bloomberg survey had expected.
Yearly wage gains have been affected by the shifting labor force makeup since the start of the pandemic, effects that are waning. But the monthly gain shows that employers are competing for workers as they rush to rehire after the pandemic downturn, especially because the figures followed solid gains in April and May.
Companies are scrambling to hire to meet customer demand, which has surged back as the economy reopens and consumers enjoy restaurant meals, take delayed vacations and spend money saved in the pandemic on other goods and services. At the same time, many would-be employees are lingering on the job market’s sidelines as child care disruptions, health concerns and government support give them reasons to stay home. Other workers are seizing the moment to switch to more attractive positions.
It also takes workers time to shuffle into new jobs, especially after months out of the labor market, during which employees may have reconsidered their prospects. Continued job hopping could keep pressure on employers in coming months.
Policymakers generally see the pickup in wages as good news, but it could create inflation risks if it persists. Higher pay would cost employers more, and they may pass that along to customers as steeper prices. Wage increases in the sectors that have seen strong gains in recent months — like leisure and hospitality, where hourly workers saw their pay jump a striking 2.3 percent from May to June — may affect prices more readily.
“Sectors that use low-wage labor intensively appear to pass most of their labor costs on to prices,” economists at Goldman Sachs wrote in a recent analysis. They expect millions of workers to return to work by September as various pandemic unemployment benefit programs end, releasing pressure by adding to the labor supply.
If that cooling doesn’t happen, it could matter for the Federal Reserve, which is closely watching to see signs that a recent jump in prices could turn into more lasting move higher in inflation.
“What would be troubling would be very wide, across the economy wages at unsustainable levels without high inflation,” Jerome H. Powell, the Federal Reserve’s chair, said in a June news conference. “That’s one of the old formulas for having high inflation. We don’t see anything like that now.”
There is plenty of evidence beyond wage growth that workers have the upper hand. The Conference Board’s index showing that jobs are “plentiful” has soared higher in recent months, job quitting is way up, and people report looking for higher wages before accepting a job. That’s echoed by anecdotes.
“One staffing company contact remarked that he turned away prospective clients that offered starting wages of less than $13 per hour because he will not be able to find anyone at that wage,” the Federal Reserve’s May survey of businesses reported, citing a company in the Cleveland district.
The S&P 500 rose on Friday, its seventh straight day of gains, as a report on employment growth showed that U.S. employers added 850,000 jobs in June.
The streak of gains is the index’s best since August, and builds on its performance for the first half of 2021. The benchmark U.S. index is now up nearly 16 percent for the year and 4.5 percent in the past two weeks. It rose 0.8 percent on Friday.
Investors have been watching the jobs data closely as they try to work out how and when the Federal Reserve will begin to taper its pandemic stimulus measures. The central bank has a mandate to support full employment but also to keep prices stable. Recently, inflation has jumped because supply and demand have become mismatched as businesses reopen. Fed policymakers have said they believe rising price pressures to be temporary, but investors have been wary of a change in policy stance.
Wages rose for a third-consecutive month. Average hourly earnings climbed 0.3 percent in June from the previous month. “The rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Labor Department report said.
“While wage pressures are clearly building, today’s report will offer an element of comfort,” Hugh Gimber, a strategist at JPMorgan Asset Management, wrote in a note. “The U.S. labor market is heating up, but it is not yet hot enough to force the Fed into adopting a more hawkish tone.”
Elsewhere in markets
Shares of Lordstown Motors fell more than 11 percent after federal prosecutors opened an inquiry into the company. The electric truck manufacturer is already being investigated by securities regulators and recently turned over its top management team.
Shares of IBM ticked down 4.6 percent after Jim Whitehurst, the company’s president, announced he would step down.
Shares in Virgin Galactic rose 5.6 percent after Richard Branson said he planned to go on the next test spaceflight on July 11, nine days before Jeff Bezos takes off with his own space company.
Most European stock indexes were higher. The Stoxx Europe 600 closed with a 0.2 percent.
Federal prosecutors have opened an inquiry into business matters at Lordstown Motors, the embattled electric truck manufacturer that was already being investigated by securities regulators and recently turned over its top management team, according to two people briefed on the matter.
It was not clear what issues the prosecutors, with the U.S. attorney’s office in Manhattan, are looking into. The investigation is in its early stages and began recently, said the people, who were not authorized to speak publicly.
In February, the Securities and Exchange Commission opened an investigation into claims that Lordstown had made about the number of orders from commercial buyers for its electric truck, which the Ohio company has said it expects to begin manufacturing and selling later this year.
The company had disclosed previously that it had received two subpoenas from the S.E.C. seeking information about those pre-order claims and some aspects of its merger last year with DiamondPeak Holdings, a special purpose acquisition company put together by David Hamamoto, a real estate investor.
A spokesman for the U.S. attorney’s office declined to comment. The investigation by federal prosecutors was first reported on by The Wall Street Journal.
Representatives for the U.S. attorney’s office did not immediately respond to a request for comment.
In a statement, Lordstown said it was “committed to cooperating with any regulatory or governmental investigations and inquiries.” The company also said it was “looking forward to closing this chapter” so that its new leadership could focus on the production of its electric pickup truck, named Endurance.
In June, Lordstown’s founder and chief executive, Steve Burns, along with the company’s chief financial officer, resigned following the release of a report by the company’s board looking into Lordstown’s claims that it had nearly 100,000 pre-orders for it trucks. The report said Lordstown’s those claims “were, in certain respects, inaccurate.”
The board ordered the report after Hindenburg Research, an investment firm, issued its own report in March that focused on the pre-order claims and what it said were other misleading claims at the company. The Lordstown board’s report said it found little merit in most of Hindenburg’s claims. But shares of Lordstown, which once traded around $29 a share, have never recovered from the release of the Hindenburg report. The stock ended the day at $9.23, down 11 percent.
Lordstown was one of the more high-profile companies to go public by merging with a so-called SPAC. Such blank-check companies are created to raise money from investors for the sole purpose of buying an existing business.
Two other electric vehicle start-ups, Nikola and Canoo, have also come under regulatory scrutiny recently. The S.E.C. is investigating both companies, which went public through a SPAC. Nikola has also been subpoenaed by federal prosecutors.
Mr. Burns launched Lordstown in early 2019 as General Motors was looking for a buyer for a huge factory in Lordstown, Ohio. G.M. sold its factory to Mr. Burns’s company for $20 million and became an early investor in Lordstown. Workhorse Group, another electric vehicle company that Mr. Burns had founded, is also an investor.
Black workers are returning to the labor market in force at a time when employers are struggling to hire, possibly giving them a chance at better jobs and higher wages.
The labor force participation rate for Black people surged in June, jumping to 61.6 percent from 60.9 percent the prior month. While that remains depressed compared to its prepandemic level, the jump pushed the share of Black people who were working or looking for jobs meaningfully above the participation rate of their white counterparts — something that had previously happened only once on record, in 1972.
This is only one month of evidence, but the timing of the increase in the participation rate could position Black workers to secure a stronger economic foothold amid the economy’s reopening. The employment rate for Black people remains lower than that of white people — a gap that widened sharply at the onset of the pandemic — but the divide is now narrowing.
“Running a hotter economy and aspiring for tighter labor markets can be egalitarian,” said Skanda Amarnath, the executive director of Employ America, explaining that strong demand in some parts of the job market seemed to be helping to boost long-disadvantaged workers.
Employers are trying to staff up as consumer demand rises, with households taking vacations and eating out again as pandemic restrictions loosen. But workers have been slow to return, and companies are paying up to attract talent.
That’s especially true in industries like leisure and hospitality, where Black people work at slightly higher rates and Hispanic people work at much higher rates. Nonsupervisory workers in that sector saw pay climb by 2.3 percent in June from the prior month. Wages overall climbed 0.3 percent in the month, another strong performance following robust gains in May and April.
Still, it is possible to overstate recent progress. The unemployment rate for Black and Hispanic workers remains much higher than that of their white counterparts. Black joblessness has been comparatively slow to decline in recent months, which could partly be because so many Black people are returning to the job search and finding work can take time.
Service industries took the biggest hit in the pandemic recession. Now they are leading the way in the recovery.
Leisure and hospitality businesses added 343,000 jobs in June, the fifth straight month of strong growth. Bars and restaurants accounted for more than half the gain. Still, the industry has a long way to go — its employment is still down more than two million jobs from before the pandemic.
Retailers, day care providers and warehouses posted gains as well. Temporary jobs, which can be a bellwether for the broader labor market, also grew, partly reversing unexpected declines in April and May.
The data released Friday also showed a big gain in government jobs, mostly in public education. But that may reflect a statistical quirk. The pandemic has thrown off normal seasonal patterns in school hiring, which the Labor Department warned may have distorted the government’s seasonal adjustment formula. Over a longer period, employment in both public and private education remains significantly below its prepandemic level.
Workers are only slowly returning to the American labor market as the economy rebounds, and the latest jobs report shows that the share of people employed or looking for work continued to stagnate in June.
The labor force participation rate, which tracks the share of people who are working or seeking work, held steady at 61.6 percent in June — although those in their prime working years, defined as ages 25 to 54, participated in greater numbers.
The large number of workers on the sidelines creates big questions for economists and policymakers at the Federal Reserve and White House as they try to gauge the labor market’s recovery.
“That was the weakest part of the report,” Priya Misra, global head of rates strategy at TD Securities. “The fact that participation is not picking up is concerning.”
If most people can be expected to return to the job search, it means substantial room for healing remains. If many have decided to leave the labor market — perhaps to retire — that could leave employers with fewer workers. Fewer workers mean fewer paychecks, less money flowing through the economy, and ultimately less output.
“Most labor force exiters who want a job haven’t searched recently, suggesting that they will re-enter once temporary disincentives to work disappear,” economists at Goldman Sachs wrote in an analysis ahead of the fresh jobs numbers. They expect participation to recover to 62.6 percent by the end of 2022, still 0.8 percentage points below its prepandemic level, “with the gap in participation primarily reflecting early retirements and demographic shifts.”
Teenagers, who had been pouring back into the labor market earlier in the year, worked or looked for jobs in smaller numbers in June, while participation jumped among those aged 20 to 24 and 45 to 54.
Adult men’s participation increased more than adult women’s, and among racial and ethnic groups, participation for Black and Hispanic people increased — in the case of Black workers, sharply — even as white and Asian people were less attached to the labor market.
A stronger than expected report from the Labor Department showing that the economy added 850,000 jobs in June added new fuel to a relentless White House messaging campaign that has cited a flurry of recent data points as evidence that President Biden’s economic agenda is working.
Mr. Biden pointed to both the job growth and wage increases as a sign that his policies are helping the economy to recover from the pandemic downturn. Average hourly earnings climbed by 3.6 percent in the year through June and 0.3 percent over the month, matching what economists in a Bloomberg survey had expected.
As the nation prepares to celebrate Independence Day this weekend, Mr. Biden said, “Today’s job news brought us something else to celebrate.”
Mr. Biden said the pace of job gains was helping to “flip the script” in the labor market, with employers now being forced to compete for workers by raising pay and offering other perks.
“That kind of competition in the market doesn’t just give workers more ability to earn higher wages,” he said. “It gives them the power to demand to be treated with dignity and respect in the workplace. More jobs, better wages. That’s a good combination.”
Administration officials have been aggressively touting new projections from the Internal Monetary Fund and the Congressional Budget Office that suggest the economy will grow at its fastest pace in a quarter century this year, and that price pressures will not spiral out of control. They have also pointed to falling claims for unemployment benefits as a sign of labor market healing.
But they had been stuck in a slump of sorts on the jobs report.
Friday’s report follows two months of job gains that fell short of analyst expectations, prompting criticism of Mr. Biden from Republicans. Lawmakers said the $1.9 trillion economic aid bill the president signed in March was holding back the recovery by extending supplemental benefits for unemployed workers through September, which some businesses blame for difficulties in hiring workers, and stoking rapid inflation.
On Thursday, Republicans on the Ways and Means Committee taunted Mr. Biden in advance, in a news release headlined: “After two underwhelming jobs reports, President Biden’s June report is make or break.”
The details of Friday’s report were not across-the-board strong for the administration. They showed a labor force that is only slowly expanding, even as millions more potential workers receive coronavirus vaccines. Administration officials had predicted workers would flock back to jobs once they were vaccinated.
But other details could support the administration’s theory of the recovery. An accelerating rebound in leisure and hospitality — particularly in food service, which powered much of the gains for June — could reflect surging demand from vaccinated consumers who have more disposable income thanks to direct payments from the federal government as part of Mr. Biden’s economic aid bill.
States and localities also appear to have avoided new waves of layoffs, as reflected in rising state and local education employment. Mr. Biden’s bill spent $350 billion on aid to states, localities and tribal governments, though in the case of many states, their fiscal outlook was already improving even before the aid arrived.
Two days into Didi’s life as a publicly traded company on Wall Street, China’s internet regulator said new user registrations on the Chinese ride-hailing platform would be suspended while the authorities conducted what they called a “cybersecurity review” of the company.
The terse announcement, issued Friday evening in China, did not explain what had prompted the review nor what it would entail — only that its purpose was “to guard against national data security risks, protect national security and uphold the public interest.”
Didi’s stock price fell about 5 percent on Friday.
The surprise intervention by Beijing immediately called to mind last year’s failed initial public offering by Ant Group, the Chinese fintech giant, whose share sale in Shanghai and Hong Kong was halted at the 11th hour after regulators summoned company executives to discuss new supervision.
In an emailed statement, Didi said it would cooperate with the authorities. “We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities,” the statement said.
Didi is China’s leading ride-hailing app, having purchased Uber’s China operations in a 2016 deal that ended a period of fierce competition between the two companies. Didi’s shares began trading on the New York Stock Exchange on Wednesday. The company says its service had 377 million active users in China during the year that ended in March.
Chinese regulators have been ramping up their scrutiny of the country’s wider internet industry since thwarting Ant’s I.P.O., criticizing what they call anticompetitive business practices and inadequate safeguards for consumers and their personal data.
In April, China’s antitrust authority imposed a landmark $2.8 billion fine on Alibaba, the e-commerce giant. A few days later, Didi was one of nearly three dozen Chinese internet businesses that were hauled before regulators and ordered to ensure their compliance with antimonopoly rules. Didi promptly issued a statement, which the antitrust regulator published on its website, vowing to “promote the development and prosperity of socialist culture and science” and to strictly obey the law.
Chinese law requires major tech platforms to observe strict standards when it comes to handling user data.
According to the government’s guidelines for cybersecurity reviews, officials have 30 business days to complete a preliminary review and offer recommendations to regulators, though this can be extended by 15 business days in “complex situations.” Regulators then have a further 15 business days to respond to the recommendations.
The internet regulator’s announcement on Friday said new user sign-ups on Didi would be suspended for the duration of the cybersecurity review, “to prevent the risks from expanding.”
Oil officials failed for a second day on Friday to resolve a dispute over quotas that prevented OPEC, Russia and their allies from reaching an agreement on raising production.
Members of OPEC Plus, the oil producers’ group, will resume their negotiations on Monday, they said.
OPEC Plus, which curtailed production last year when prices plummeted because of the global economic slowdown caused by the pandemic, had been leaning toward an increase in production by 400,000 barrels a day each month for the rest of this year, beginning in August. Also on the table was a proposal to extend the current production agreement which will expire at the end of April, for the rest of 2022.
But the talks, which opened on Thursday, were tripped up when the United Arab Emirates insisted on what would amount to a substantial increase in its production quota if OPEC Plus extended the output agreement.
Saudi Arabia, which along with Russia has come to dominate the group, says revising the quotas — the country-by-country rules that govern how much oil each is allowed to produce — would lead to chaos because other countries would also insist on new deals.
The tensions are an indication that increasing demand for oil, and rising oil prices, can test the cohesion of OPEC Plus. Producers like the United Arab Emirates and Iraq want to make sure they don’t miss out on opportunities to sell more oil.
Since late last year, oil prices have risen about 85 percent as global economies have started to revive from the impact of the coronavirus pandemic. During this time, OPEC Plus has kept a tight leash on production.
“A disorderly return of that output could end the oil price rally,” wrote Helima Croft, head of commodities at RBC Capital Markets, in a note to clients. On the other hand, a failure of the group to agree on production increases in the coming days may drive prices up. Already some analysts say $100-a-barrel oil is a possibility.
So far, the markets have largely shrugged off the dispute. On Friday, Brent crude, the international benchmark, rose 0.3 percent to $76.14 a barrel.
The dispute with the United Arab Emirates is of particular concern for the group and its de facto leader, Saudi Arabia. The United Arab Emirates has big aspirations to increase its oil output and otherwise expand its petroleum industry along with the rest of its economy. For several months, these ambitions have bumped up against Saudi-led production restraints.
Analysts say the United Arab Emirates has become increasingly frustrated with its position in OPEC Plus.
“They have made it very clear that their ambitions are to increase production, and they somehow think that no one is listening to them,” said Amrita Sen, head of oil markets at Energy Aspects, a research firm.
The Persian Gulf country, whose oil is almost entirely produced by Abu Dhabi, is taking a bigger hit — a reduction of close to one-third of its capacity — than other OPEC Plus producers.
The Biden administration is planning to expand consumer protections for airlines passengers, Brian Deese, the director of the National Economic Council, said at a White House news conference. The new rules, being drafted by the Transportation Department, would require refunds of fees for services airlines failed to provide. That includes returning checked bag fees if luggage is significantly delayed or payments for WiFi access if the connection is inadequate. The administration also plans to require greater transparency in disclosure of such fees.
Robinhood, the stock-trading app that grew in popularity and notoriety during the pandemic, revealed skyrocketing revenue and a loss of more than $1.4 billion in the first three months of this year, as it took a key step on Thursday toward one of the year’s most anticipated initial public offerings. Its offering prospectus offered the first full look at the company’s financial performance. Nearly 18 million people use Robinhood’s app to buy and sell stocks and cryptocurrencies, with $81 billion in assets under its custody. In 2020, Robinhood eked out a profit of $7 million. It reported profits in two out of the last nine quarters.
An effort to push the most sweeping changes to the global tax system in a century gained significant momentum on Thursday when 130 nations agreed to a blueprint in which multinational corporations would pay an appropriate share of tax wherever they operate. The result of the negotiations, overseen by the Paris-based Organization for Economic Cooperation and Development and revived this year by President Biden, is also remarkable because it includes China, Russia and India among the signatories — large economies that had been wary of a tax overhaul.
Today in the On Tech newsletter, Shira Ovide talks to Kate Conger about how restaurants and delivery apps like Uber Eats and DoorDash are thinking about post-pandemic home delivery and addressing complaints, including fees and complexities that rankle restaurant owners and some diners.
WASHINGTON — Federal regulators on Friday cleared a batch of vaccine that could furnish up to 15 million doses of Johnson & Johnson’s one-shot coronavirus vaccine, deciding they can be safely distributed despite production failures at the vaccine-making factory that ruined 75 million other doses.
The move brings the total number of Johnson & Johnson doses made at the Baltimore facility and cleared by the Food and Drug Administration for distribution in the United States to roughly 40 million. But Johnson & Johnson remains far from its goal of delivering 100 million doses to the federal government by the end of June. European Union officials have said the firm is missing its delivery targets there, as well.
The vaccine cleared on Friday is not yet bottled, and the Biden administration’s plans for it remain unclear. But with the pandemic abating and the country awash in vaccines from the two other authorized manufacturers, any new Johnson & Johnson doses produced in the United States are likely destined mostly for export.
Johnson & Johnson has been unable to produce much vaccine since regulators shut down the Baltimore factory, operated by Emergent BioSolutions, nearly three months ago because of major production errors. Johnson & Johnson had been relying on Emergent, its subcontractor, to produce vaccine for use in the United States as well as to meet its commitments overseas while expanding its own plant in Leiden, the Netherlands.
Even with the newly cleared batch, Johnson & Johnson remains nearly 40 million doses short of its 100-million-dose pledge for U.S. use. The F.D.A. did not disclose the precise number of doses cleared Friday, but multiple people familiar with Emergent’s operation said the batch amounted to as many as 15 million doses.
Also on Friday, European regulators approved the scale-up of Johnson & Johnson’s Dutch plant, a piece of good news for the firm amid its supply woes. “Today’s approval represents progress in expanding our global manufacturing network to supply our Covid-19 vaccine worldwide,” the company said in a statement.
And on Thursday, Johnson & Johnson reported that early results of unpublished studies showed that its vaccine is effective against the highly contagious Delta variant, even eight months after inoculation. That was a reassuring finding for those who have gotten the company’s shot.
The Baltimore factory is expected to remain shuttered for several more weeks while Emergent tries to bring it up to standard, according to people familiar with its operation who spoke on condition of anonymity. The F.D.A. said in a statement Friday that it was not yet ready to certify that the plant was following good manufacturing practices.