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Hiring slows sharply as economy adds just 194,000 jobs

The September jobs report is a major disappointment after economists had predicted a gain of about 500,000.

(CN) — A surge in coronavirus cases driven by the highly contagious delta variant continued to take a toll on the U.S. economy last month, as employers added only 194,000 new jobs.

The September jobs report released Friday by the Labor Department falls well short of the Dow Jones estimate of around 500,000 new jobs. It marks two straight months of disappointing labor market growth after hiring slowed down in August.    

“This is quite a deflating report,” said Nick Bunker, economic research director at Indeed Hiring Lab. “The hope was that August was an anomaly but the fact is, the delta variant was still with us in September.”

The unemployment rate continues to fall and clocked in at 4.8% in September, a 0.4% drop from the month before. But Bunker noted that labor force participation is also down, so the decline in joblessness doesn’t necessarily mean more people found work.

“This year has been one of false dawns for the labor market. Demand for workers is strong and millions of people want to return to work, but employment growth has yet to find its footing,” he wrote. “Hopefully the current decline in Covid case counts continues. That seems to be the only way out of our current situation.”

The leisure and hospitality industry, which has been hit the hardest by the Covid-19 pandemic, added the most jobs in September – 74,000 – but is still down 1.6 million jobs compared to its pre-pandemic level. The increase was driven mostly by a gain of 43,000 positions in arts, entertainment and recreation, while food and drinking establishments added 29,000 new jobs and hotels added 2,000.

Professional and business services came in second with 60,000 jobs added last month, followed by retail (56,100), transportation and warehousing (47,300), information (32,000) and manufacturing (26,000). Education and health services, meanwhile, lost 7,000 positions.

While the private sector gained 317,000 jobs overall in September, government payroll plummeted by 123,000. Federal government employment stayed flat, but state governments shed 22,000 jobs last month and local governments lost 101,000 overall – there were 144,200 fewer positions in local education but 42,500 more jobs in other areas of local government.

August’s total increase in jobs was revised up from 235,000 to 366,000, and July’s was also revised up to 1.09 million. While monthly job growth is averaging 561,000 so far this year, the U.S. is still down 5 million jobs compared to February 2020, before the coronavirus brought the economy to a standstill.

Consultant Joel Naroff of Naroff Economics said that while overall labor market growth in September was disappointing, the details paint a brighter picture.

“The private sector added a lot of new workers. That is critical given the extreme shortage of labor that employers are claiming is out there. Apparently, firms are finding people to hire, though clearly not as many as they would like,” Naroff wrote.

He added, “The low headline number was largely due to the education component, which has apparently lost its past seasonality. Schools are opening at a different pattern than in the past, so we had seasonally-adjusted 257,000 workers added in July, and a 150,000 cut in September.”

Naroff noted hourly wages are up 4.6% from a year ago and total hours worked are also on the rise, suggesting an income increase that will fuel consumer demand. He predicted the Federal Reserve will wind down its bond-buying program faster than expected at its meeting next month in order to keep inflation in check.  

“That would indicate the Fed is serious about withdrawing its stimulus and the members recognize the threat that an extended period of high inflation presents for growth and interest rate,” he said.

President Joe Biden highlighted the 4.8% unemployment rate when speaking about Friday’s report from the White House, calling it “a sign that our recovery is moving forward, even in the face of the Covid pandemic.”

“Jobs up, wages up, unemployment down. That’s progress,” he said.

He added, “Right now, things in Washington, as you all know, are awfully noisy. Turn on the news and every conversation is a confrontation. Every disagreement is a crisis. But when you take a step back and look at what’s happening, we’re actually making real progress.”

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