Last Friday, the Bureau of Labor Statistics released the August jobs report. It was a huge disappointment. The economy added only 235,00 jobs, but we were expecting around 750,000. In July we added more than 1 million. This is a huge pullback, most likely because of the surge in COVID cases caused by the Delta variant.
Why it matters: With the 235,000 jobs added, plus upward revisions for June and July, the economy now has 5.3 million fewer jobs than it had prior to the pandemic.
By the numbers: Two key datapoints jump out as proof that the Delta variant is the culprit for the slowing job market.
First, job growth in leisure and hospitality completely stalled in August. The sector added no jobs in August. It had been averaging over 300,000 jobs added over the last four months. That was a sign of a reopening economy. Food service and drinking places shed 42,000 jobs, which was offset by gains in arts, entertainment, and recreation. As former CBO Director Doug Holtz-Eakin noted, if the leisure and hospitality sector had added jobs like it had in recent months, the total jobs number would’ve been near expectations.
- Second, the number of workers that teleworked rose in August for the first time since December 2020. Their staying home to avoid the virus signals Americans are likely reducing other activities that are slowing the economy.
The unemployment rate fell to 5.2%, but this was due to only 190,000 entering the labor force in August. The labor force participation rate and employment-population ratios are still well off their levels prior to COVID.
- Wage growth was the only silver lining in the report. Hourly wages grew 0.6% in August from July. On an annual basis they grew 4.3% from last year. This is good news for workers. The shortage of workers to fill available jobs is driving these wage gains.
Bottom line: On the August pace of 235,000 jobs a month, it would take almost 2 years to reach our pre-COVID employment level. That would mean it would take roughly 3 ½ years to fully recover. Even though this would be a faster rebound than after the Great Recession, this is much too slow. We need to pick up the pace of job creation and the pace of workers filling available positions.