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Expand chart
Data: U.S. Department of Labor and Wells Fargo Securities; Chart: Axios Visuals

Employers are doing what they have to do to address persistent labor shortages: They’re offering more money.

Why it matters: The reopening of the U.S. economy is fueling demand for goods and services. But businesses have struggled to meet that demand because current pay rates aren’t attracting the qualified applicants that employers want.

By the numbers: The June jobs report on Friday showed average hourly earnings were up 0.3% month over month in June.

  • This continued growth is notable because it comes on top of a 0.4% gain in May and a 0.7% jump in April.
  • On an annualized basis, the past three months of gains represent a 5.9% pace of growth, which is substantially higher than the 2.4% average from the last economic cycle, per Wells Fargo.

What they’re saying: "Getting workers back to the job site has not come cheap," Wells Fargo senior economist Sarah House writes. "Employers have had to pony up in industries where shortages have been particularly acute."

  • Lower-wage industries, like leisure, hospitality and retail, which combine to employ 30 million people, reported strong gains.
  • Leisure, hospitality and retail accounted for 49% of the 850,000 jobs added in June.

Yes, but: "There is still progress to be made," Indeed Hiring Lab's Nick Bunker writes in an email. "Employment in leisure and hospitality is still 12.9% below its pre-pandemic level."

  • The 15.1% pace in leisure and hospitality "reflects the mismatch between demand and supply, which should be resolved over time, leaving wage growth to cool in this sector," says BofA head of U.S. economics' Michelle Meyer. "We would therefore squarely put this in the 'transitory' camp."

All major industries are pacing above 3% — even higher-wage areas like information, financial, professional and business services.

  • Morgan Stanley economist Robert Roesner notes that higher-wage industries have also struggled with record job openings and unusually high quit rates.
  • "The wage data is starting to show a transition from more idiosyncratic pressures to more broadly based and potentially more persistent pressures," Roesner writes.

The bottom line: Businesses need to be able to sell stuff, but they can’t do it without workers. And as long as demand is outstripping supply, workers will continue to have leverage to ask for more money.

Go deeper

Unruly customers threaten economic recovery

Illustration: Annelise Capossela/Axios

The pace of the economic recovery hinges in part on workers returning to jobs that involve dealing with an unpredictable public. But many of those workers say increasingly combative customers — angry about everything from long wait times to mask mandates — have prompted them to quit.

The big picture: Aggressive and violent clashes between customers and service workers over COVID safety protocols over the past nearly two years have led to prison sentences, fines and deaths.

One-on-one with Stephanie Linnartz of Marriott International

Stephanie Linnartz of Marriott International in 2018. Photo: Patrick T. Fallon/Getty Images

“People are dying for experiences now more than ever,” Stephanie Linnartz, Marriott International president, tells Axios.

  • “Leisure travel in many states and parts of the world is beating 2019,” Linnartz notes, speaking on the sidelines of Fortune’s Most Powerful Women Summit.

Earnings season is here

Illustration: Aïda Amer/Axios

The third-quarter earnings season is going to be telling. We all expected monster numbers across the board out of Q2 results — but this time around, some companies will distinguish themselves more than others for how they’ve managed the escalating supply chain headaches and effects of the Delta variant.

Why it matters: The blistering pace of economic growth is expected to have slowed in Q3. That will show up earnings, which began trickling out last week.