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US employers add just 235,000 jobs as delta slows hiring

Job gains in August fell well short of expectations, while the unemployment rate dropped to 5.2%.

(CN) — American employers added only 235,000 jobs last month, a sign that hiring is slowing down amid a rise in Covid-19 infections driven by the delta variant.

The August jobs report released Friday by the Labor Department is a major disappointment, given economist were expecting about 720,000 new jobs to be added.

The more contagious delta strain of the coronavirus is blamed for the slowdown in the pandemic recovery. New infections in the U.S. are up 14% over the past two weeks and deaths have more than doubled, according to a New York Times tracker.

Nick Bunker, economic research director at Indeed Hiring Lab, said the report “has the delta variant written all over it.”

“It is clear that the recent surge in Covid-19 cases is a strong headwind to the labor market,” he wrote. “The good news is that the wind was not so strong that it stopped all progress. The underlying momentum is still there.”

The leisure and hospitality sector, which includes restaurants, hotels and bars hit hardest by the pandemic, added no jobs in August after averaging gains of 350,000 per month for the last six months. The industry is still down 1.7 million jobs since February 2020, according to Friday’s report.

Professional and business services saw the biggest gain, adding 74,000 positions last month. Transportation and warehousing came in second with 53,000 more jobs. Employment in that industry is actually above the pre-pandemic level by 22,000 positions.

Private education employment was up 40,000 jobs in August, but state government education lost 21,000 positions and local government education lost 6,000.

There were 29,000 fewer jobs in the retail sector last month, with the majority of losses coming from food and beverage stores. Employment in construction, health care and wholesale trade was mostly unchanged.  

The 235,000 total jobs added in August falls well below the revised 1.1 million added in July and 962,000 in June. The economy has added back 17 million positions since the height of the pandemic in April 2020, but is still down 5.3 million compared to the pre-pandemic level.

Despite the slowdown in hiring, the unemployment rate dropped 0.2% to 5.2% last month.

Bunker said sustained labor market recovery is clearly still threatened by the coronavirus.  

“A fair amount of progress has been made, but the economy will not get a sure footing until the pandemic is successfully dealt with,” he said. “We have 5.3 million fewer jobs than before the pandemic and we will not get back there anytime soon until we have more certainty about the public health situation.”

Consultant Joel Naroff of Naroff Economics said he doesn’t think the delta variant is having impact on job growth, but added it is too early to tell.

“First of all, the July and August gains were revised upward sharply, and the three-month average is 750,000. This is massive. Almost 62% of the sectors posted payroll increases in August and that is really good,” he wrote.

And more importantly, he said, the unemployment rate continues to drop.  

“The fall was driven by all the right reasons: Unemployment fell sharply, the number of employed skyrocketed and the labor force rose, though only moderately,” he said. “Once the rate gets below 5%, and we are closing in on that, the issue of full employment will be raised.”

Naroff stressed that a single jobs report shouldn’t define current economic conditions, noting employers have added 2.5 million jobs over the last three months while the jobless rate fell 0.6% during that time.

“This report may have been disappointing, but only because economists were unrealistic on the ability of the economy to create huge numbers of new positions every single month,” he said.

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