Job growth wanes in sign of uncertain fall recovery

Job growth slowed further last month, the latest sign that the economy’s spring momentum has faded — and a warning that the recovery could go into reverse this fall without further government support.

U.S. employers added 1.4 million jobs in August, the Labor Department said Friday, down from the gains in the three previous months. The slowdown would have been more pronounced without the hiring of nearly a quarter-million temporary census workers.

The report held some good news: The unemployment rate fell by more than expected, to 8.4 percent. In April — when joblessness was the highest since the Great Depression — forecasters at the Congressional Budget Office said unemployment would remain in the double digits well into next year.

But an increasing number of people reported in the Labor Department’s August survey that they had lost their jobs permanently, rather than being temporarily laid off or furloughed — a sign that the crisis is doing lasting damage.

“There’s a fragility in the numbers,” said Diane Swonk, chief economist at accounting firm Grant Thornton. “There are cracks in the underlying foundation.”

Those cracks are appearing as trillions of dollars in federal spending, which helped sustain many households and businesses early in the pandemic, are drying up.

A $600 weekly federal supplement to unemployment benefits expired in July; a $300-a-week replacement, announced by President Donald Trump last month, has been slow to kick in and will last for only a few weeks. The government’s marquee business relief effort, the Paycheck Protection Program, ended in August.

The August jobs data was collected early in the month and might not reflect the full impact of the loss of benefits, economists warn. That calendar quirk could have political ramifications, easing pressure on Congress to agree on a new round of emergency spending.

“If the labor market data continue to hold, if we don’t see a big destruction to consumer spending on the back of the loss of the unemployment benefits, that reduces the sense of urgency that something needs to be done prior to the election,” said Michelle Meyer, head of U.S. economics for Bank of America.

Economists warn that would set the stage for a big drop in spending in the fall, leading to more job losses and a wave of small-business failures. Corporations including American Airlines have announced they are laying off more workers or, as in the case of the department store stalwart Lord & Taylor, going out of business.

Applications for unemployment benefits rose last week, and data from Homebase — which provides time-management software to small businesses — shows that the number of people working has declined since early August. Economists say those figures suggest that job growth could turn flat or negative in the fall.

“Federal spending was meant to be a bridge,” said Beth Ann Bovino, chief U.S. economist for S&P Global. “Well, it looks like the ravine has widened and the bridge is halfway built, so there are a lot of people stranded.”

All told, less than half of the 22 million jobs lost early in the pandemic have been recovered. But the unemployment rate has fallen much faster than most forecasters expected, from 10.2 percent in July and 14.7 percent in April. And the labor force grew in August, an indication that jobless workers are not yet giving up their searches as many did during the last recession a decade ago. Some sectors that were dealt a blow by the pandemic, such as the retail industry, continued to post strong job gains.