US hiring slumps in August as Delta's toll becomes clear

Washington (AFP) –

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The United States added far fewer jobs than expected in August as businesses grappled with the Delta wave of Covid-19, a major disappointment and indication that the economy's recovery is facing renewed complications.

Employment rose only 235,000 last month, according to Labor Department data released Friday, and while the unemployment rate fell to a pandemic low of 5.2 percent, the report was nowhere near the job gains seen in recent months, which have topped one million.

In some ways, the lackluster hiring told a familiar tale, with the world's largest Covid-19 outbreak once again hurting the labor market and underscoring that it is unlikely to make much improvement if infections remain high.

"The economy can't recover and fully reopen unless we can contain the spread of the virus -- devastating," Diane Swonk of Grant Thornton wrote on Twitter of the data.

The report also carries implications for President Joe Biden, who is negotiating passage of two massive spending bills through a Congress where even his ostensible allies have showed a willingness to defy him.

The Federal Reserve is also paying close attention to the data, as it could impact when the central bank begins slowing its massive purchases of bonds meant to help the economy weather the pandemic, which Chair Jerome Powell has signaled could start by the end of the year.

"A slower pace of hiring amid a rapidly spreading Delta variant will warrant a patient tapering approach from the Fed," said Lydia Bossour of Oxford Economics, predicting they may not begin reducing purchases until as late as January.

- No good news -

The payroll increase reported by the Labor Department in August was sharply lower than the upwardly revised 1.1 million positions added in July, and much below the 750,000 jobs analysts expected the world's largest economy to add.

The weak hiring comes as states and business impose mask-wearing requirements and other restrictions to fend off the fast-spreading Delta variant.

Covid-19 vaccines have allowed for strong rehiring in recent months after more than 20 million people lost their jobs when the pandemic began last year, but August's data included ominous signs of weakness across the labor market.

The leisure and hospitality sector, which bore the brunt of the pandemic's initial layoffs, had added an average of 350,000 jobs per-month over the last six months, but in August it added zero positions, the data said.

There was no improvement either in the labor force participation rate indicating the share of people employed or looking for work, which was at 61.7 percent in August, around the range it has hovered at for more than a year.

Among racial groups, adult men and white Americans saw their unemployment rates decline, but joblessness remained widespread for others, including Hispanics, for whom unemployment was 6.4 percent, and Black Americans, which saw a 0.6 percent jump to 8.8 percent unemployment.

The number of people reporting they couldn't work because their employer lost business or closed due to the virus jumped to 5.6 million from 5.2 million in July.

"September likely will be weak too, and we're becoming nervous about the prospects for a decent revival in October, given that behavior lags cases, and cases are yet to peak," Ian Shepherdson of Pantheon Macroeconomics said.

- Big wage jump -

Industries that did add jobs last month include professional and business services, which rose 74,000, transportation and warehousing, which gained 53,000, and private education, which added 40,000, though state government education and local government education saw declines.

A positive surprise was seen in wages, where average hourly earnings rose 0.6 percent to $30.73 after four straight months of increases.

While the Labor Department said the growth may be attributable to "rising demand for labor associated with the recovery from the pandemic," Shepherdson said it could also be a consequence of the lack of hiring for leisure and hospitality jobs, which often pay low and affect the average for wages.