The US economy added just 235,000 jobs in August, a sharp drop from preceding months, as employers cut back hiring plans amid the spread of the Delta variant of the coronavirus virus.
The unemployment rate declined by 0.2 percentage points to 5.2% from 5.4% in July and has fallen dramatically from a high of 14.7% in April last year. So far this year, monthly US job growth has averaged 586,000, according to the Bureau of Labor Statistics.
But August’s hiring slowdown was unexpected. Economists polled by Bloomberg had anticipated a gain of 725,000 jobs for August, after surging over 1m in July.
In a White House address, Joe Biden largely glossed over the disappointing figures, describing the US economy as “durable and strong” and claimed his administration had added double the number jobs of any prior first-year president.
“While I know people wanted to see a larger number today, and so did I, what we’ve seen this year is continued growth month after month in job creation,” Biden said. “Wages are going up. This is the kind of growth that makes our economy stronger, and not just boom or bust.”
According to the latest government figures, job increases in August came from gains in professional and business services, transportation and warehousing, private education, and manufacturing.
But employment in retail declined over the month as employers backed off from adding workers in lower-wage industries such as transportation, leisure and hospitality in response to weakening demand for those services, itself a reflection of the effect that the Delta variant is having on consumer activity.
About 5.6 million people did not work at all or worked fewer hours at some point in August due to the pandemic, an increase of 400,000 on July.
“The drop-off in high-contact services employment growth suggests that, even though few states have reimposed restrictions beyond mask mandates, the Delta variant is nevertheless weighing on activity by scaring off customers,” said Paul Ashworth, chief US economist at Capital Economics.
Economists have been lowering their expectations for economic growth for third quarter, citing the pandemic, shortages of raw materials related to supply-chain issues, and a spike in inflation that shows few signs of abating.
Car sales are among the hardest hit, dropping 10.7% in August, with economists at Goldman Sachs and JPMorgan slashing growth estimates for the rest of the year to as low as a 3.5% annualized rate after growing at 6.6% rate in the second quarter.
Last week, the Federal Reserve chair, Jerome Powell, confirmed that the US economy is in a recovery but held off from announcing when central bank support for the economy would be lifted or interest rates raised.
