An abrupt slowdown in hiring shows that the Delta variant of Covid-19 is having a significant impact on the US economy, in addition to its impact on the health of the nation.
Just 235,000 jobs were added in August according to the Bureau of Labor Statistics, coinciding with the startling increase in coronavirus cases and deaths across much of the South and Midwest.
Economists had been hoping for an increase of three times that number, with 725,000 new hires forecast.
The unemployment rate nevertheless fell from 5.4 per cent in July to 5.2 per cent. One year ago unemployment stood at 8.4 per cent.
Speaking at the White House on Friday morning, President Joe Biden argued that despite the impact of the Delta variant on the economy, “what we’re seeing is an economic recovery that is durable and strong”.
“While I know some wanted to see a larger number today, and so did I, what we’ve seen this year is continued growth, month after month,” he adds.
“There’s no question the Delta variant is why the jobs report isn’t stronger,” says the president laying out the progress made to date in fighting both the virus and the economic damage it has caused. He then urged Congress to continue to take steps to pass the next steps of his economic and infrastructure agenda.
Since April 2020, when unemployment peaked in the initial economic shutdown sparked by the arrival of the pandemic on American shores in the preceding month, 17 million jobs have been gained back.
To reach the pre-pandemic number of jobs, a further 5.3 million new hires would have to take place to reach the 152.5 million jobs recorded in February 2020.
This looked like a near-term possibility, with 962,000 jobs added in June and another 1.05 million in July, hence the disappointment of the August numbers, even as the July figures were revised upwards.
Average monthly employment gains this year of 586,000 jobs show how much of a miss this was, with employment in retail declining over the month by 29,000 jobs.
Further to that was a loss of 42,000 jobs in food services and drinking places indicating either a slowdown in trade as concerns about the coronavirus return or as a result of the wave of resignations as employees seek better opportunities and better pay. Many businesses are struggling to find staff to fill vacant roles where they exist.
🇺🇸August #Jobsreport: "It's a softie"
✅#Unemployment 5.2% (-0.2pt)
🟡Participation rate 61.7% (flat)
🔴Job loss vs Feb'20: 5.3mn
⬆️Share regained:76% pic.twitter.com/rhytXW8ctr
— Gregory Daco (@GregDaco) September 3, 2021
While leisure and hospitality has been a big driver of job growth in recent months as Americans begin to travel and go out again, in August new hiring was flat, and the overall number employed in the sector remains 10 per cent down on pre-pandemic levels.
Daniel Zhao, chief economist for employment review site Glassdoor, notes that the number of Americans working remotely actually increased in August as companies pull back from reopening plans in the response to the Delta variant.
“A resurgence in remote work is likely to delay the economic recovery even more for central business districts reliant on corporate office workers,” he notes.
Mike Bell, global market strategist at JP Morgan Asset Management, writes that the sensitivity of the leisure and hospitality sector to Covid, along with the recent drop in consumer confidence, “adds to the sense that the economy is not yet fully free from the clutch of Covid”.
Though Mr Bell notes that this “near term hit from the latest Covid wave will, most likely, only slightly delay the recovery”.
There were significant gains in professional and business services (74,000), transportation and warehousing (53,000), manufacturing (37,000), education and health services (35,000), information (17,000), and financial activities (16,000).
In addition to the drop in retail employment, 8,000 jobs were lost in government, 1,300 in utilities, and 3,000 in construction.
After the release of the jobs report the New York stock market opened slightly lower as Wall Street waits for clues as to how the Federal Reserve might respond to the latest economic data.