Job creation in August was a huge disappointment as the economy only added 235,000 jobs, the Labor Department reported on Friday.
Economists polled by Dow Jones had sought 720,000 new hires.
The unemployment rate fell from 5.4% to 5.2%, in line with estimates.
The August total – the worst since January – is linked to heightened fears of the pandemic and the impact that rising Covid cases could have on a largely robust recovery. The weak report could tarnish the Federal Reserve’s policy as it weighs whether to withdraw some of the massive stimulus it has added since the outbreak in early 2020.
“The recovery in the job market slowed this month with a dramatic showdown in all industries,” said Daniel Zhao, chief economist at Glassdoor. “Ultimately, the wave of the Delta variant is a hard reminder that the pandemic is still in the driver’s seat and controlling our economic future.”
Leisure and hospitality jobs, which were the main driver of the overall gains at 350,000 per month for the past six months, stalled in August as the industry’s unemployment rate rose to 9.1%.
Instead, professional and business services resulted in 74,000 new jobs. Other winners included transportation and warehousing (53,000), private education (40,000), and manufacturing and other services, each increasing by 37,000.
The retail sector lost 29,000, with the bulk of it coming from food and beverage stores which saw a 23,000 decline.
“The weaker employment activity is likely both a demand and a supply story – companies have stopped hiring in the face of weaker demand and uncertainty about the future, while workers have withdrawn for health reasons,” said the Bank of America economist. Joseph Song, in a message to customers.
According to the report, the US is seeing around 150,000 new Covid cases daily, raising concerns that the recovery could stall until the latter part of the year.
“Delta is the story in this report,” said Marvin Loh, global macro strategist for State Street. “It’s going to be a bumpy rebound in the job market and one that is pushing back against a more optimistic narrative.”
During the month, the number of those who said they could not work due to a pandemic rose by about 400,000, bringing the total to 5.6 million.
“Today’s job report reflects a sharp decline in employment growth, likely due to the increasing impact of the delta variant of COVID-19 on the US economy, although August is also a notoriously difficult month due to the holidays, to be precise investigate, ”said Tony Bedikian. Head of Global Markets at Citizens.
Still, the news wasn’t all bad for Jobs.
There have been significant upward revisions over the past two months, with the grand total now standing at 1.053 million in July, up from the original estimate of 943,000, while June was raised from 938,000 to 962,000. In the two months, the revisions added 134,000 to the initial counts.
Wages also continued to accelerate, increasing by 4.3% year-on-year and 0.6% on a monthly basis. Estimates had been 4% and 0.3%, respectively.
An alternative measure of unemployment, which includes discouraged workers and part-time workers for economic reasons, fell sharply, falling from 9.6% in July to 8.9% in August.
The employment rate remained unchanged at 61.7% and was thus still well below the 63.3% in February 2020, the month before the pandemic was declared.
Employment also remained well below pre-Covid levels, with 5.6 million fewer employees and the total workforce still 2.9 million fewer.
Another key metric from the Fed, the employment-to-population measure, was 58.5%, a tenth of a percentage point more than in July, but still well below the pre-pandemic 61.1%. The measurement looks at the total number of employed persons compared to the population of working age.
August numbers have been volatile in recent years and are often revised significantly. You come amid other positive signs of employment.
Weekly unemployment reports have fallen to their lowest level since the early days of the pandemic in March 2020, but a large employment gap remains.
It’s not that there aren’t enough jobs: Recruiting firm Indeed estimates there are currently about 10.5 million open positions, a loose record for the U.S. job market. ZipRecruiter saw strong gains in job postings in the travel, arts & entertainment, and education sectors on Friday, suggesting broadly these sectors should see strong gains in the future.
Fed officials are closely monitoring job numbers for clues as to whether they can withdraw some of the political aid they have given since the pandemic began.
For the past few weeks, central bankers have been optimistic about the employment situation, but said they must see continued strength before changing course. What is at stake for now is the Fed’s massive monthly bond purchase program, which could be scaled back before the end of the year.
However, if the job data softens, it could lead Fed officials to wait until 2022 before scaling back their purchases. Fed officials have made it clear that rate hikes will come well after the taper starts.
“I still expect them to taper by the end of the year,” said Loh of State Street. “Maybe some of the more aggressive talks about something that happened in September are off the table. I think November is still a possibility.”
The Fed will next meet on September 21-22.
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