U.S. Job Gains Falter in August as Pandemic Concerns Grow

The U.S. economy added only 235,000 jobs in August, according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS), well below economists’ expectations of more than 720,000 jobs.

Increasing infection rates from the delta variant of COVID-19 caused more business and travel restrictions to return, slowing hiring and other economic activity. However, upward revisions to employment data for the past two months added 134,000 jobs to previous estimates. It remains to be seen if the national expiration of enhanced unemployment benefits will spur hiring enough to overcome this second pandemic slowdown.

On an annual basis, more than 6 million jobs were added for the year-ending August, almost triple the average annual level of about 2.3 million jobs the U.S. has averaged since 2011.

Much of the slowdown (or retrenchment) in hiring in the month of August was from the two industries that contributed the most jobs in July – Leisure and Hospitality and Government. In July, the 670,000 combined jobs for both industries were almost 64% of the 1.05 million jobs gained but in August they were essentially zero. In fact, food service and drinking places employment cut 41,500 jobs last month, its first decline since December.

The headline, or U3, unemployment rate dropped 20 basis points (bps) to 5.2% in August, but the civilian labor force participation rate was unchanged from last month and remains the same from one year ago. The employment-population ratio ticked up 10 bps from July to 58.5% but is also well below pre-pandemic levels.

The number of persons not in the labor force remains persistently high at more than 100 million and sits almost 5 million greater than before COVID-19 as retirees, students and those with family or childcare obligations or just not seeking work remain out of the labor force. The level of employment in the U.S. labor market is still about 5.3 million workers below the pre-pandemic employment level in February 2020.

The number of unemployed was almost 8.4 million in August, down by almost two-thirds from the 23.1 million unemployed at the outset of the pandemic lockdowns but about 47% greater than pre-pandemic levels. Initial unemployment claims dropped to their lowest level in more than a year, at 340,000 for the week of August 28.

With fewer low-wage food and drinking place workers on August’s payrolls, and moderate job gains concentrated in more higher-paying positions, the annual change in average hourly earnings of $1.26 (to $30.73) was 4.3% greater than last August’s rate. The average annual increase in hourly wages had been about $0.60, or half the current rate, before the pandemic. Despite cuts in restaurant and hospitality workers from payrolls, hourly wages for the Leisure and Hospitality industry were up 10.3% for the year.

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With no gain in hiring for Leisure and Hospitality workers in August, that industry is still 10%, or 1.7 million, employees short of the pre-pandemic February 2020 level, although, their unemployment rate has fallen out of double digits, at 9.1% in August. Mining and Logging is the only industry currently experiencing a double-digit unemployment rate at 10.2%. Manufacturing and Financial Activities have both fallen below 4% unemployment.

According to the BLS’s supplemental data measuring the effects of the coronavirus pandemic on the labor market , the percentage of workers that telework increased slightly in August to 13.4% from 13.2% in July as more business are reinstituting work-from-home policies due to delta variant concerns. Compared to July, teleworking increased the most in the architecture, engineering, and legal professions (all above 32%), and by industry, the highest rates were in finance and insurance (37.7%) and professional and technical services (35.5%).  Computer and mathematical occupations saw their teleworking percent fall from 49% in July to a still-high 46% in August.

In other August BLS data, the number of people leaving or quitting their job (which had been trending upward) fell from 930,000 in July to 822,000 in August as more workers worry about the economy going forward. The number of unemployed for 27 weeks or longer dropped sharply from 3.4 million in July to 3.2 million in August with several states reducing enhanced unemployment benefits already. Those working part-time that want full-time work was virtually unchanged from last month at about 4.4 million but is a little more than half the figure from last year, while the number of workers who prefer part-time positions has increased to about 20.4 million.

Workers marginally attached to the labor force fell by more than half a million from last August to 1.6 million and the number of discouraged workers stood at 367,000, down 184,000. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.

The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, fell to 8.8% in August compared to 9.2% last month and 14.2% in August 2020.

Industry Focus

With the collapse of job gains in the Leisure and Hospitality and Government sectors in August, moderate gains in other industries led the pack. Professional and Business Services, Manufacturing and Other Services had solid gains for the month of more than 37,000 new jobs each. Government and Construction were the only two industries to shed jobs for the month.

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• Almost 80% of the 74,000 jobs gained in the Professional and Business Services industry came in the high-paying professional and technical services subsector (+58,500), the majority in architectural and engineering services (+18,700) and computer systems and design (+9,800). A loss of 5,800 jobs in temporary help services tempered the 12,600 monthly gain in administrative and waste services.

• The Manufacturing industry gained 37,000 jobs in August, as the durable goods sector added 31,000 jobs, with motor vehicles and parts accounting for 24,100 of them. Difficulty in procuring semiconductors has caused auto manufacturers to announce cutbacks in September, so expect this subsector to falter next month. Nondurable goods manufacturing added only 6,000 jobs for the month, with plastics and rubber products (+3,100) leading the way.

• The Other Services sector had a very strong gain of 37,000 jobs in August with a jump of 19,200 jobs in personal and laundry services, followed by repair and maintenance (+8,700) and membership associations and organizations (+8,600).

• The Education and Health Services industry’s monthly gain of 35,000 jobs was exceeded by the educational services (+40,200) sector as the school year is just beginning. The health care and social assistance sector lost about 4,600 jobs as most health-related subsectors alternated with minor gains and losses. The home health care subsector suffered a loss of 11,600 jobs in August.

• Pandemic concerns are hitting the public-facing retail sector with job losses totaling 28,500 for the month, most of it in food and beverage stores (-23,200). Overall, the Trade, Transportation, and Utilities industry gained 24,000 jobs in August as online purchasing seems to have returned with a gain of 53,200 jobs in transportation and warehousing. The couriers and messengers and warehousing and storage subsectors gained 20,000 jobs each. Wholesale trade was largely unchanged.

• The Information industry gained a solid 17,000 jobs for the month with almost all of that in the data processing, hosting, and related services subsector (+11,900). The publishing industries, except Internet subsector contributed 4,500 jobs to August’s total.

• The Financial Activities industry added 16,000 jobs in August, primarily in the real estate and rental and leasing sector. The 12,400 job gain in the rental and leasing services subsector was dominated by real estate (+10,600).

• The Mining and Logging industry gained 6,000 jobs in August led by the support activities for mining subsector (+4,000). Disruptions to oil and gas drilling platforms and other coastal facilities due to Hurricane Ida will likely appear in next month’s BLS report.

• As mentioned, food services and drinking places cut 41,500 jobs in August but solid gains in the amusements, gambling, and entertainment subsector (+30,000) and mild gains in other subsectors resulted in no change in employment from July for the Leisure and Hospitality industry. This industry is still about 1.7 million jobs below pre-pandemic levels.

• The Construction industry lost 3,000 jobs for the month with a strong gain of 17,000 jobs in residential specialty trade contractors more than offset by losses in nonresidential specialty trade contractors (-9,200), heavy and civil engineering construction (-8,300), and construction of buildings (-2,700).

• Government education employment cutbacks at the state (-20,700) and local (-5,700) levels reduced overall Government employment by 8,000 workers, despite a gain of 19,600 local government employees.