Daily Management Review

August US Job Growth Hit By Surge In Covid-19 Caused By Delta Variant


August US Job Growth Hit By Surge In Covid-19 Caused By Delta Variant
A resurgence of Covid-19 infections resulted in a slowdown in new jobs created in the United States in August, primarily driven by lower recruitment in the leisure and hospitality sector which in turn also affected hiring in the restaurants and hotel industry.
However there was strength in the other details of the Labor Department's employment report which was released on Friday. The report showed US rate of employment dropping to a 17-month low of 5.2 per cent in August while growth rate in July was sharply revised.  There was a 0.6 per cent rise in wages and long periods of unemployment were experienced by fewer people in August.
And even though there is an apparent slowdown in third quarter economic growth in the country, the above data suggests underlying strength in the economy. Economists expect growth to slow down in the current quarter because of a surge in infections, caused primarily by the highly contagious Delta variant of the coronavirus, as well as the continued shortage and high prices of raw materials, which is affecting automobile sales and restocking.
"It is important to keep the right perspective," said Brian Bethune, professor of practice at Boston College. "Given the supply chain constraints and the ongoing battle to lasso COVID-19 to the ground, the economy is performing exceptionally well," Bethune said.
In August, nonfarm payrolls increased by 235,000 jobs, showed the survey of establishments, which marked the lowest growth since January this year. The report also showed revised data for July when a very large, 1.053 million, new jobs were created. The initial report had put the number at 943,000.
Employment in the US was also stronger in June than was initially estimated, which put the average monthly job growth I the last three months at 750,000 new jobs. At the same time however, the volume of employment is 5.3 million jobs lower than its peak in February 2020.
Another factor in the slowdown of employment growth, in addition to the surge in Delta cases of the Covid-19, was the waning impact of the fiscal stimulus provided since last year by the government.   The response rate to the survey is lower in August and the pandemic has made it harder to adjust education employment for seasonal fluctuations.
"The August payroll figures have historically been revised higher in the years since the Great Recession, sometimes significantly, and there's a good chance this effect will occur again this time," said David Berson, chief economist at Nationwide in Ohio.

Following average growth of 377,000 per month over the prior three months, employment in August in thee leisure and hospitality sector remained unchanged. Employment in restaurants and bars dropped by 42,000, while new jobs in hotels and motels fell by 34,600. That offset an addition of 36,000 new jobs in arts, entertainment and recreation sectors. There was loss of 29,000 jobs in the retail segment.
There was however growth in employment in the mining, financial services, information and professional and business services sectors as well as in transportation and warehousing businesses. 37,000 more jobs were added in the manufacturing sector, which was led by addition of 24,100 new jobs in the automobile industry.