August Jobs Report: Labor Market Struggles Under Weight of Delta

September 3, 2021

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.

Today’s jobs report shows the recovery slowed significantly in August, with just 235,000 jobs added, undershooting expectations and well below the upwardly revised 1,053,000 jobs added in July. The unemployment rate dropped to 5.2 percent, continuing to improve. Storm clouds from the Delta variant muted jobs growth in August in a harsh reminder that the pandemic is in the driver’s seat of the economic recovery.

Payroll Growth Slows to 235,000 in August

Employers added 235,000 jobs to payrolls in August, well below expectations. Hiring in leisure & hospitality came to a standstill in August with jobs growth falling from 415,000 jobs added in July to precisely 0 in August. Similarly, retail trade lost 28,500 jobs as the reopening slowed and consumer demand declined. Government job gains also fell to 8,000 jobs lost in August from 255,000 jobs added in July, though gains in the last few months have been driven by seasonal idiosyncrasies.

Unemployment Falls to 5.2 Percent, Temporary Layoffs Unchanged

The unemployment rate fell to 5.2 percent in August, dropping from 5.4 percent in July. Unemployed workers on temporary layoff rose slightly to 1,252,000 in August, as the Delta variant slowed rehiring of furloughed workers. The Black unemployment rate rose 0.6 percentage points to 8.8 percent, a worrying signal for a K-shaped recovery as the labor market slows amid Delta.

Hot Average Hourly Earnings Growth in Leisure & Hospitality Slows

Average hourly earnings in leisure & hospitality for production & non-supervisory workers rose 0.7 percent month-over-month in August, decelerating from 1.5 percent in July. While still hot, the slowdown in wage growth adds to the evidence that leisure & hospitality worker demand is slowing dramatically as Delta spreads and consumer demand declines.

Remote Work Increases as Delta Variant Spreads

The share of American workers working remotely at some point over the last four weeks rose slightly to 13.4 percent in August, up from 13.2 in July as the Delta variant forced companies to pull back on reopening plans. A resurgence in remote work is likely to delay the economic recovery even more for central business districts reliant on corporate office workers.

Recovery in the Coming Months

The labor market recovery hit the brakes in August as storm clouds from the Delta variant loomed over the economy. The dramatic slowdown in leisure & hospitality is a sign that slowing consumer demand can mute hiring even in an industry still affected by labor shortages. The weak report will weigh on the Federal Reserve and raise the question of whether tapering asset purchases should be delayed while the effects of Delta ripple through the economy. Ultimately, today’s report is a harsh reminder that the pandemic controls our economic destiny.

More Insights

Employers added just 235,000 jobs in August, down from the upwardly revised 1,053,000 in July, as the Delta variant spreads. The labor market finally had a 1-million-job-gain month post-revisions, but that was marred by the slowdown in August.

The drop to 0 jobs added for leisure & hospitality drove the slowdown in August. Retail also lost 28,500 jobs as the reopening halted. Despite reports of labor shortages, it seems the slowdown in consumer demand was enough to discourage hiring in August.

The slowdown in leisure & hospitality jobs is similar to the slowdown we saw during last winter’s wave so continuing weakness is possible in the coming months if the latest wave of the Delta variant continues to grow.

Payrolls are 5.3 million below pre-crisis levels. While payrolls have recovered dramatically given the magnitude of the Covid recession, the deceleration in August raises the specter of a slowdown similar to what we saw last winter.

Annual wage growth for production & nonsupervisory employees in leisure & hospitality slowed for the first time since December 2020. Wages are still up 12.8 percent year-over-year, but the slowdown is further evidence of modestly weaker labor demand. Wage growth is still hot though, an indicator that even if labor demand falls, it’s falling from very high levels.

Despite weak payroll growth, the unemployment rate dropped to 5.2 percent, down from 5.4 percent in July, on the back of a small increase in the labor force.

In a departure from earlier in the recovery, the decline in unemployment was more driven by falling permanent layoffs—falling to 2.5 million in August from 2.9 million—than temporary layoffs—largely unchanged in August. This is a sign some employers may be furloughing again in the face of rising Delta cases.

The Black unemployment rate rose in August to 8.8 percent, a large 0.6 percentage point increase. While an increase in the Black labor force is a partial explanation, other groups saw an increase in employment despite a flat or falling labor force.

The teen unemployment rate also rose 1.6 percentage points to 11.2 percent in August, increasing most for Black or African American and Hispanic or Latino teens. Teen unemployment has been below pre-crisis levels for the last few months, but is now increasing, perhaps due to the end of summer and the expiration of enhanced unemployment benefits.

The percent of Americans working from home any time during the last 4 wks due to the pandemic rose to 13.4 percent in August as companies delayed reopening plans. That number is likely to rise in coming months if the latest wave continues.

Access to work-from-home options varies significantly by occupation with almost half of workers in computer & mathematical occupations working from home due to the pandemic while the shares of workers in service, construction, production or transportation occupations working from home are all in the low single digits.

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