Employers sharply reduced hiring in August, an emphatic display of how the spread of the pernicious coronavirus Delta variant is restraining the economy as Americans pull back on travel, dining out, and shopping.
US employers added 235,000 jobs last month, the Labor Department said Friday, far short of forecasts and the smallest increase since January, when COVID-19 infections also were rising. The unemployment rate edged down to 5.2 percent from 5.4 percent in July.
The report underscores how the pandemic continues to distort the labor market and hinder the full recovery of the 22 million jobs that disappeared in March and April of last year.
Some notable examples of mismatches and inequities: Job openings are at a record high even though 2.7 million more Americans were out of work last month than in February 2020. Women filled just 12 percent of the new jobs. And the unemployment rate for Black men and women increased while it fell for whites and Asians.
“There’s no question that the Delta variant is why today’s job report isn’t stronger,” President Biden said at the White House. “I know people were looking, and I was hoping, for a higher number.”
Even with job growth averaging 585,000 a month this year, there are still 5.3 million fewer jobs than before the COVID outbreak.
Biden said the economic recovery remained on track, but one reason he was eager to see faster job growth: Emergency federal jobless benefits, which helped millions of families get through the pandemic, expire this weekend. That will remove billions of dollars in spending power from the economy if those folks don’t land new jobs.
More than two dozen states have already canceled the federal programs, including one which bumped up jobless pay by $300 a week, but that hasn’t led to more people looking for work. The labor force participation rate, a measure of those working or searching for a job, was 61.7 percent in August, unchanged from the previous month.
If the pandemic and the loss of jobless benefits hurt the economy further, the Federal Reserve may be forced to push back its plan to tighten credit by the end of the year. Reaction to the jobs data in financial markets was muted on Friday.
The Delta variant has forced employers and workers to rethink plans for more normal routines. Some consumer-facing businesses have grown more cautious about hiring, especially since job-seekers are in short supply and consumers are curtailing spending, economists said. Meanwhile, many people remain hesitant to go back to work or even look for a job, either because of virus concerns or lack of child care.
“Perhaps the most telling number is the decline in the number out of the labor force that want a job from 6.5 million in July to 5.7 million in August,” tweeted Betsey Stevenson, formerly a member of President Obama’s Council of Economic Advisers and now an economist at the University of Michigan.
Lower-wage positions that require frequent interaction with the public — often held by women and people of color — were noticeably affected last month. Retailers shed 29,000 jobs, while payrolls were unchanged at restaurants and bars, where previously they had been adding jobs at an average of 350,000 a month, fueling the solid growth in the job market since the start of the year. Higher-wage professional and business services jobs recorded the strongest increases, along with transportation and warehousing, private education, and manufacturing.
“The Delta variant is moving faster now than vaccinations, and that’s hurting the job prospects and safety of workers in face-to-face service jobs,” said Claudia Sahm, a consultant and former Federal Reserve economist. “Today’s data is a wakeup call.”
The employer and household surveys used by the Labor Department in its report were completed in mid-August, before the recent decline in COVID cases in some hard-hit parts of the country. While the outlook for the rest of the year hinges on the course of the pandemic, analysts generally expect the economy to keep expanding, albeit at a slower clip than the 6.5 percent annualized rate seen in the second quarter.
“Hopefully, this was a temporary setback,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston, noting that job reports for June and July were revised higher by 134,000, and that average hourly wages increased a healthy 4.3 percent in August from a year ago.
Moreover, the Delta surge has not yet led to the reinstatement of business and school closings and social distancing rules that plunged the country into a brief recession last year, which has minimized job losses.
“While Delta is weighing on the recovery, it won’t undermine it unless it continues to intensify and causes schools to close for in-person learning, and the health care system is overwhelmed and forces businesses to re-implement social distancing and even shut down,” said Mark Zandi, chief economist at Moody’s Analytics. “Hopefully, the UK’s experience with Delta, where it has abated, is a good guide for the US.”
After spiking from mid-May to mid-July, COVID cases in Britain, where Delta is the dominant strain, began falling rapidly through early August. There has been an uptick since then, though infections haven’t returned to July levels.
But the August data pointed to a troubling trend: an increasingly unequal job recovery.
The unemployment rate for Black workers rose to 8.8 percent from 8.2 percent, while the rate for white workers fell to 4.5 percent from 4.8 percent. The jobless rate for Asians fell to 4.6 percent from 5.3 percent.
“It’s discrimination, plain and simple,” said William Spriggs, a Howard University professor who also serves as chief economist for the AFL-CIO. How else to explain why white workers with only a high school education found jobs while unemployment among Black workers with an associates degree increased, he said.
The rebound also is continuing to leave behind many women, according to Misty Heggeness, a principal economist at the Census Bureau. She cites two reasons why almost 90 percent of the jobs created last month were filled by men: stalled hiring in leisure and hospitality, where women predominate, and a lack of child care.
“My new research shows that it would have been disproportionately mothers who would have stepped back for childcare,” she said in an e-mail. “I am worried about mothers becoming increasingly time poor — meaning they can’t engage fully in employment because of childcare needs.”