Employers added 235,000 jobs in August, less than a third of what was expected, the Labor Department reported on Friday.
Prior months were revised upward, with July coming in at 1.1 million and June at 962,000, both well above the previously reported estimates. The unemployment rate, meanwhile, fell to 5.2% from 5.4%.
“In August, notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other Services,” the report stated. “Employment in retail trade declined over the month.”
Some economists had expected a cooling in the pace of the recovery, given the recent spike in coronavirus cases. The August number was the worst since January.
David Berson, chief economist at Nationwide Mutual, says the back-to-back months of 900,000-plus gains in June and July “were better than good, they were great.” He also says that August is a month that tends to get revised upward.
Berson acknowledges that the economy has cooled the past couple of weeks but says that may not show up in the jobs numbers until next month or thereafter. Many large companies have delayed plans to reopen their offices while also instituting mask and vaccine requirements.
“COVID is a real deterrent for people getting back into offices and for people in front-facing occupations,” says Richard Wahlquist, president and CEO of the American Staffing Association. “The delta variant is having a ripple effect on the economy, it’s gotten people scared.”
At the same time, companies say they are finding it difficult to hire workers, with a record 10-million-plus current openings.
The NFIB’s monthly jobs report, released Thursday, found a record 50% of small businesses reported being unable to fill their job openings, with the number of unfilled job openings well above the 48-year historical average of 22%.
“Small employers are struggling to fill open positions and find qualified workers resulting in record high levels of owners raising compensation,” said NFIB Chief Economist Bill Dunkelberg. “Owners are raising compensation in an attempt to attract workers and these costs are being passed on to consumers through price hikes for goods and services, creating inflation pressures.”
An improving labor market is one factor the Federal Reserve Board is looking for to decide when to begin paring back it’s $120 billion-per-month purchases of Treasuries and mortgage-backed securities. Those have kept interest rates low.
The August number “is not completely surprising given the emergence of the Delta variant, which has continued to beat down the already hurting leisure and hospitality sectors,” Steve Rick, chief economist at CUNA Mutual Group, says. “Though it is disheartening that the labor market couldn’t maintain momentum from the rapid growth, it shows us that our best way to true economic recovery is continuing the work of fully containing COVID-19 cases.”
Bill Armstrong, president of human resources consultants Gava Talent, says it is important not to read too much into one month’s report. “Pre-pandemic this would have been a solid report. Given what we are hearing from our clients regarding their hiring plans for September and beyond I believe there is a good chance that the low number today is more of a blip than a start of a new trend.”