- Nonfarm payroll growth in August increased by just 235,000 vs. expectations of 720,000.
- The unemployment rate fell to 5.2%, in line with estimates.
- Leisure and hospitality jobs were flat during the month after leading the way for much of the year.
- Wages rose at a 4.3% year-over-year clip.
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.
The unemployment rate dropped to 5.2% from 5.4%, in line with estimates.
August’s total — the worst since January — comes with heightened fears of the pandemic and the impact that rising Covid cases could have on what has been a mostly robust recovery. The weak report could cloud policy for the Federal Reserve, which is weighing whether to pull back on some of the massive stimulus it has been adding since the outbreak in early 2020.
“The labor market recovery hit the brakes this month with a dramatic showdown in all industries,” said Daniel Zhao, senior economist at jobs site Glassdoor. “Ultimately, the Delta variant wave is a harsh reminder that the pandemic is still in the driver’s seat, and it controls our economic future.”
Leisure and hospitality jobs, which had been the primary driver of overall gains at 350,000 per month for the past six months, stalled in August as the unemployment rate in the industry ticked higher to 9.1%.
Instead, professional and business services led with 74,000 new positions. Other gainers included transportation and warehousing (53,000), private education (40,000) and manufacturing and other services, which each posted gains of 37,000.
Retail lost 29,000, with the bulk coming from food and beverage stores, which saw a decrease of 23,000.
“The weaker employment activity is likely both a demand and supply story — companies paused hiring in the face of weaker demand and uncertainty about the future while workers withdrew due to health concerns,” Bank of America economist Joseph Song said in a note to clients.
The report comes with the U.S. seeing about 150,000 new Covid cases a day, spurring worries that the recovery could stall heading into the final part of the year.
“Delta is the story in this report,” said Marvin Loh, global macro strategist for State Street. “It’s going to be a bumpy recovery in the jobs market and one that pushes back against a more optimistic narrative.”
The month saw an increase of about 400,000 in those who said they couldn’t work for pandemic-related reasons, pushing the total up to 5.6 million.
“Today’s jobs report reflects a major pullback in employment growth likely due to the rising impact of the Delta variant of COVID-19 on the U.S. economy, though August is also a notoriously difficult month to survey accurately due to vacations,” said Tony Bedikian, head of global markets at Citizens.
Still, the news wasn’t all bad for jobs.
The previous two months saw substantial upward revisions, with July’s total now at 1.053 million, up from the original estimate of 943,000, while June was bumped up to 962,000 from 938,000. For the two months, revisions added 134,000 to the initial counts.
Also, wages continued to accelerate, rising 4.3% on a year-over-year basis and 0.6% on a monthly basis. Estimates had been for 4% and 0.3% respectively.
An alterative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons fell sharply, dropping to 8.9% in August from 9.6% in July.
The labor force participation rate was unchanged at 61.7%, still well below the 63.3% in February 2020, the month before the pandemic declaration.
Employment also remained well below pre-Covid levels, with 5.6 million fewer workers holding jobs and the total workforce still smaller by 2.9 million.
Another key Fed metric, the employment-to-population gauge, stood at 58.5%, up one-tenth of a percentage point from July but still well below the 61.1% pre-pandemic level. The measure looks at total jobholders against the working-age population.
August’s numbers have been volatile in past years and often see substantial revisions. They come amid other positive signs for employment.
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. ZipRecruiter on Friday noted sharp gains in job postings for travel, arts and entertainment and education, generally signaling that those sectors should see strong gains ahead.
Fed officials are watching the jobs numbers closely for clues as to whether they can start easing back some of the policy help they’ve been providing since the pandemic started.
In recent weeks, central bank leaders have expressed optimism about the employment picture but said they would need to see continued strength before changing course. At stake for now is the Fed’s massive monthly bond-buying program, which could start getting scaled back before the end of the year.
However, if the jobs data gets softer, that could prompt Fed officials to wait until 2022 before tapering its purchases. Fed officials have been clear that interest rate hikes will come well after tapering starts.
“I still expect them to taper by year end,” said State Street’s Loh. “Maybe some of the more aggressive conversations about something happening in September are off the table. I think November is still a possibility.”
The Fed meets next on Sept. 21-22.
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Source: Economy - cnbc.com
