Economy gains 943,000 jobs as delta variant threatens recovery

(CN) — American employers added 943,000 jobs in July, a sign that the economic recovery from the coronavirus pandemic remained on track before the delta variant sparked new worries about a return to widespread restrictions.  

While employers beat expectations of around 850,000 new jobs last month, some experts say the next jobs report may not be as rosy.

“With this report, it feels like the labor market recovery has really found its footing. Job growth continues to accelerate and more workers are finding jobs or starting to pick up their job search,” said Nick Bunker, economic research director at Indeed Hiring Lab. “However, the delta variant does pose a risk to the pace of progress.”

The highly contagious delta variant has been driving a surge in new infections across country. The United States is reporting about 75,000 new Covid-19 cases a day, up from less than 12,000 in June but far below the January level of around 250,000.

The Centers for Disease Control and Prevention issued new mask guidance last week, saying even fully vaccinated Americans should wear a face covering indoors in public if they’re in a virus hotspot. Los Angeles County reinstated its indoor mask mandate two weeks before the revised CDC guidelines amid a spike in community transmission.

The July jobs report, released Friday by the Labor Department, shows employers hadn’t yet been affected by growing concern over the delta variant.

Bunker said the economic recovery “has not hit a major speed bump yet.”

“Recovery at this pace or even faster would be excellent. We will just have to see what damage the delta variant will inflict,” he wrote.

The unemployment rate dropped from 5.9% to 5.4% last month, according to the Labor Department’s report, and average hourly earnings rose by 0.4%, a bigger increase than expected.  

July’s uptick in new jobs marks the largest monthly gain since last August and follows a similarly strong report of a revised 938,000 jobs added in June. But despite the recent progress, the U.S. economy is still down 5.7 million jobs compared to its pre-pandemic level in February 2020.

President Joe Biden touted the strong jobs report in brief remarks from the White House on Friday morning.

“While we doubtlessly will have ups and downs along the way as we continue to battle the delta surge of Covid, what is indisputable now is this: the Biden plan is working,” he said. “The Biden plan produces results, and the Biden plan is moving the country forward.”

But the president said there is much more to be done to beat the delta variant and advance the economic recovery, urging unvaccinated Americans to get the shot to help prevent the kind of economic damage seen in the spring of 2020.

“This is a pandemic of the unvaccinated,” he said. “We have to get more people vaccinated.”

The leisure and hospital sector, which includes restaurants and bars hit hardest by lockdown orders, again led the way in job creation last month, adding 380,00 positions. Food and drinking establishments accounted for two-thirds of the increase, or 253,000 new jobs. Still, the industry as a whole is down 1.7 million jobs compared to early last year.  

The local government education field added 221,000 positions in July and private schools added 40,000. The Biden administration has been pushing for schools to fully reopen for in-person learning this fall, with students and teachers wearing masks, but it remains to be seen whether the delta variant derails those plans.

The professional and business services industry gained 60,000 jobs in July, while transportation and warehousing added 50,000. Increases were also seen in health care (37,000), manufacturing (27,000) and the information sector (24,000).

Retail lost 6,000 jobs last month after two months of strong gains. The industry is down 270,000 positions since February 2020.

Joel Naroff of Naroff Economics called delta and other possible variants a wild card for labor market forecasts, but he does not expect growth to stall much. He also predicts the Federal Reserve will keep interest rates low for the foreseeable future.

“The Fed might worry that growth could remain so strong that full employment is reached sooner than the members expect. On the other hand, the pandemic is not over,” the consultant wrote. “My guess is that the Fed is willing to let the economy run hot for an extended period and not panic if inflation is elevated as well.”

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