It’s a big belly flop against expectations, if still a decent number for a maintenance level in a normal job market. This isn’t a normal job market, however, and we’re not getting much closer to one either. The US economy added only 235,000 jobs in August, just barely over a third of the 720,000 jobs predicted by economists. Unemployment went down as expected, but hours worked also took a hit:
Total nonfarm payroll employment rose by 235,000 in August, and the unemployment rate declined by 0.2 percentage point to 5.2 percent, the U.S. Bureau of Labor Statistics reported today. So far this year, monthly job growth has averaged 586,000. In August, notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Employment in retail trade declined over the month. …
The labor force participation rate, at 61.7 percent in August, was unchanged over the month and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020. The participation rate is 1.6 percentage points lower than in February 2020. The employment-population ratio, at 58.5 percent, was little changed in August. This measure is up from its low of 51.3 percent in April 2020 but remains below the figure of 61.1 percent in February 2020.
Even against the monthly average this year, August was a flop. One ominous sign relates directly to the pandemic. The number of people unable to work due to COVID-19 restrictions jumped upward by 400,000:
In August, 5.6 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic—that is, they did not work at all or worked fewer hours at some point in the last 4 weeks due to the pandemic. This measure is up from 5.2 million in July. Among those who reported in August that they were unable to work because of pandemic-related closures or lost business, 13.9 percent received at least some pay from their employer for the hours not worked, up from 9.1 percent in the prior month.
For those who did work, wages rose significantly — but hours declined:
Average hourly earnings for all employees on private nonfarm payrolls rose by 17 cents to $30.73 in August, following increases in the prior 4 months. In August, average hourly earnings of private-sector production and nonsupervisory employees rose by 14 cents to $25.99. The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings. (See tables B-3 and B-8.) In August, the average workweek for all employees on private nonfarm payrolls was 34.7 hours for the third consecutive month. In manufacturing, the average workweek fell by 0.2 hour over the month to 40.3 hours, and overtime remained at 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 34.2 hours.
Both the wage drop and the sudden slowdown on hiring came as a surprise to analysts, who presumed that momentum had built back up in the economy. The problem isn’t a lack of new jobs, CNBC points out in reporting on the “huge disappointment” of this August jobs report:
Job creation for August was a huge disappointment, with the economy adding just 235,000 positions, the Labor Department reported Friday.
Economists surveyed by Dow Jones had been looking for 720,000 new hires. …
Weekly jobless filings have fallen to their lowest levels 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 out there: Placement firm Indeed estimates that there are about 10.5 million openings now, easily a record for the U.S. labor market.
This suggests that the government distortions from the pandemic unemployment benefits might still be playing out. If so, it won’t be for long; those benefits will end next week. Some Democrats suggested another extension to deal with the Delta wave, but the political steam has run out on subsidizing unemployment. Several states have already cut off such benefits, and Republicans would likely torpedo any such effort to restore them in Congress.
The Wall Street Journal wonders how much impact the Delta variant had on hiring:
The rising number of Covid-19 cases tied to the Delta variant could result in slower job growth for two reasons, economists say. Businesses, particularly in services sectors requiring in-person contact, could hold off on hiring amid heightened pandemic uncertainty. Jobless individuals who are fearful of Covid-19 health risks might also be slower to return to the labor market until the virus abates.
The Delta variant appears to be denting consumer spending growth and confidence. The number of diners seated at restaurants was down 9% in the week ending Sept. 2 compared with the same week in 2019, before the pandemic, for instance, according to reservations site OpenTable. The volume of people eating out has gradually slowed from earlier this summer. …
In a sign of weakening, the number of employees logging hours fell 4% in August from July, according to Homebase, a scheduling-software company with mainly smaller-business clients. The steady decline in employment throughout the month was driven by industries that had seen the sharpest job growth in recent months amid state reopenings. The number of hospitality employees working dropped 35% from mid-July, while those employed in entertainment fell 20%, according to Homebase.
The consumer spending issue might be in part related to Delta, but it’s almost certainly part of the tail end of the sugar high induced by two quick bursts of direct stimulus payments in January and March. It’s likely to be a blend of both, but since neither will get addressed in the next month or two, it seems more likely than not that hiring won’t get much better over that period, either.
The momentum of economic growth appears to have sputtered out a bit. The end of the pandemic-UI programs might provide a boost as people are forced to get back into the job market and take those long-open positions, but that will have a downward effect on wages for a while as well. The sugar highs have left us with quite a hangover.