Hiring slowed sharply in August as employers added a disappointing 235,000 jobs, with COVID-19 surges dampening both consumer demand and Americans’ willingness to return to work.
Restaurants and bars, which had been driving record employment gains, shed jobs.
The unemployment rate, which is calculated from a different survey, fell from 5.4% to 5.2%, the Labor Department said Friday.
Economists had estimated that 750,000 jobs were added last month, according to a Bloomberg survey.
So far, the U.S. has recovered 17 million, or 76%, of the 22.4 million jobs lost in the spring of last year, leaving the nation 5.3 million jobs below its pre-pandemic level.
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“Before delta, we were looking for (1 million plus monthly) payroll gains in the fall, but that’s now going to be a real struggle,” says Ian Shepherdson, chief economist of Pantheon Macroeconomics.
The setback, he says, will likely prompt the Federal Reserve to delay an anticipated announcement that it will reduce its bond-buying stimulus to December or even later, Shepherdson wrote in a research note.
In August, payrolls were unchanged in leisure and hospitality as restaurants and bars lost 42,000 jobs. The broader sector had gained an average of 350,000 jobs a month for the past six months. Retail was similarly affected by the rising infections, losing 29,000 jobs.
Professional and business services added 74,000 jobs. Private education added 40,000 jobs but state and local education lost 27,000, which could reflect the challenges Labor faces seasonally adjusting the August numbers, which typically show strong gains as all schools reopen, according to Contingent Macro Research. Transportation and warehousing added 53,000 jobs. And manufacturing added 37,000 in a sign persistent supply-chain bottlenecks may be easing somewhat.
Construction cut 3,000 jobs.
One consolation: Employment gains for June and July were revised up by a combined 134,000 as July’s advance was pushed above 1 million, the largest increase since August of last year
Rising COVID-19 infections, fueled by the delta variant, were widely expected to put a speed bump in the nation’s booming recovery from the pandemic, which saw about 1 million jobs created in both June and July despite a severe worker shortage. Over the past month, new daily COVID-19 cases have increased more than tenfold to about 155,000.
The spike prompted the Centers for Disease Control and Prevention to revive its indoor mask mandate – including for vaccinated people in some regions – late last month. Restaurant seatings on OpenTable, an online reservation service, fell to 89% of their 2019 levels the week Labor conducted its jobs survey, down from 95% during a comparable week in July, according to Goldman Sachs.
Consumer confidence fell sharply last month to its lowest level since February on delta variant worries.
And Homebase, which supplies payroll software to small firms, said the numbers of employees working and business open fell about 4% and 2.5%, respectively, last month.
“In our view, the rapid spread of the delta coronavirus variant in August could dampen workers’ willingness to return to work and lead some companies to hit the pause button on hiring,” economist Lydia Boussour of Oxford Economics wrote in a research note.
The number of Americans on temporary layoff was roughly unchanged last month at 1.2 million as restaurants and stores that had been recalling some workers instead cut staffers. The figure is down from 18 million in the early days of the pandemic.
About 15% of unemployed workers said they were on temporary layoff, similar to the previous month. That means there’s still some room for further gains, though it’s narrowing.
The ranks of Americans permanently laid off fell by 443,000 to 2.5 million.
The COVID-19 spike may temper expectations for continued robust job gains this fall as worker shortages ease. The early expiration of federal unemployment benefits in about half the states already has nudged some people back into the workforce, Goldman says, and a broader return has been anticipated despite a vigorous debate over the impact of the payments.
Waning fears of COVID contagion and the reopening of many schools were also set to draw in workers on the sidelines. But some schools are temporarily reverting to online learning or a hybrid model amid the rise in infections.
“The unknown is how much concern about contagion and uneven school reopenings will affect the (labor force) participation of parents who have young children,” says Diane Swonk, chief economist of Grant Thornton.
The upshot: The delta variant could weigh on both customer demand and the return of many Americans to the labor force in coming months, says Gus Faucher, chief economist of PNC Financial Services Group. Faucher still expects monthly job growth to average a healthy 650,000 the rest of the year and into 2022, though he adds that risks “are to the downside.
Restaurants have been hit hardest by worker shortages.
PLNT Burger, with 10 quick-serve outlets in the Washington, D.C., area and Pennsylvania, has seen customer visits ebb with the COVID-19 surge, says CEO Ben Kaplan. But he says the chain, which serves plant-based burgers, can better cope with a shift in demand to take-out after experiencing a similar dynamic early last year, keeping overall demand steady.
The labor shortages, though, aren’t going away anytime soon, Kaplan says. He mostly blames the departure of many employees from the industry, especially for gig jobs, like driving for Uber, or food or package delivery services.
“It’s a really tough time to attract talent to the industry,” he says, noting the 100-employee chain is always looking to fill 10 to 15 openings.
Rather than offer sign-on bonuses, as the company did early in the summer, Kaplan says he’s focusing on holding on to existing workers by laying out a path for promotion.
PLNT Burger, he says, plans to open three new restaurants soon but they’ll be more compact to accommodate a smaller staff.
“We don’t want big stores that require a lot of bodies,” Kaplan says.