Hiring slowdown illustrates impact of delta variant
The U.S. economy stumbled in August as the latest coronavirus wave forced employers to curtail hiring in the sectors that had spearheaded the job market’s recent resurgence.
The gain of 235,000 jobs reported Friday by the Labor Department was well below what economists had expected and made August one of the weakest months for hiring since the recovery began more than a year ago.
The softness was most apparent in lower-paid industries in which employees deal with customers face to face, like restaurants, bars, stores and hotels.
What’s more, the pace slowed just before federally funded unemployment benefits expired for 7.5 million Americans and as the dividends from a government stimulus package enacted early in the year were fading, hampering growth.
The August showing would have been respectable before the pandemic. But after seasonally adjusted gains of 962,000 in June and 1.05 million in July, it was a stark indication of the impact of the delta variant of the coronavirus.
Diane Swonk, chief economist at Grant Thornton, an accounting firm in Chicago, said the report was worrisome. “The worst effects of the delta variant have yet to hit,” she said. “This is the beginning, not the end.”
There are 5.3 million fewer jobs nationwide than there were in February 2020. And the letup in hiring is a political setback for President Joe Biden, who has sought to establish a solid economic foundation for the ambitious social programs he is trying to push through Congress.
“I know people were looking, and I was hoping, for a higher number,” he said Friday. But he expressed optimism about the country’s economic direction, calling the recovery “durable and strong.”
The latest data complicates plans for policymakers at the Federal Reserve, which has been buying $120 billion in government-backed bonds each month to keep borrowing cheap, bolstering lending and spending. Officials are debating when to ratchet down the bond purchases, and while many experts still expect an announcement in November, they said delta could end up pushing that back.
Moreover, the Labor Department data was collected in the second week of August, so it may not reflect the full extent of the delta spread or the impact of hurricanes Henri and Ida in the second half of the month. The figures also showed the first increase since December in the number of people working from home — a trend that could hinder the revival of service businesses that depend on office work and business travel.
But even though the report was disappointing, the stock market barely reacted, and there were bits of good news. The unemployment rate dipped to 5.2 percent from 5.4 percent in July. Average hourly earnings increased
4.3 percent from the previous August, exceeding the expected 3.9 percent. And there were decent gains in employment in business and professional services as well as in manufacturing.
Some employers, in fact, say their demand for workers exceeds the supply of candidates. “There are a lot of companies vying for employees,” said Joe Nelligan, CEO of Molex, an electrical components manufacturer in the Chicago area that is part of Koch Industries.
His company has created more flexible shifts to help lure workers, including running the lines on weekends for people who need to stay home during the week to take care of their children.
“We’re being more creative and also trying to have more opportunities for advancement,” Nelligan said. Wages have also gone up, with hourly pay ranging from $15 to $20 in many locations.