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August 2021 Job Growth Weakened by Covid-19 Delta Variant

By Phillip Sprehe

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for August 2021 on Friday, September 3rd. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 18 months since the Covid-19 economic lockdown. 

Employment in the U.S. rose by 235,000 jobs, well below the Geographic Solutions, Inc. forecast of 506,000. However, it still outperformed the WSJ Economist Survey projection of 720,000 jobs. The results are disappointing and appear to be chiefly driven by the spread of the Covid-19 Delta variant. This has led some states and localities to reinstate restrictions on activity as well as individuals self-limiting their activities. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, and job applications. 

The unemployment rate dropped to 5.2%, below the Geographic Solutions forecast of 5.3% but right on the WSJ forecast of 5.2%. The unemployment rate forecast used internal data on job openings and job severances.

Job creation was strongest in Professional & Business Services (+74,000). Manufacturing and Other Services grew by roughly half that, each finishing with 37,000 new jobs for the month. Construction and Government employment fell. The decline in public-sector employment was mostly due to the drop in education jobs at both the state and local level.

Leisure & Hospitality employment was flat in August with an interesting split between its subsectors of Arts, Entertainment, & Recreation (+35,000) and Accommodation and food services (-35,000). It seems as though consumers have avoided restaurants, hotels, and tourism-related businesses in favor of recreation that can be done outdoors or at safe distances which is reflected in the employment.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate declined to 5.2% from the previous month. 

The labor force participation rate remained at 61.7% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.4% to 8.8%. Declines in the unemployment rates with a steady labor force participation rate along with weak job numbers in the CES report indicate that there were gains among the self-employed and gig economy workers who are not counted in non-farm payrolls in the CES report.
 

The continued pace of the labor market recovery heavily depends on the Delta variant and reaction to it. The August job numbers are reminiscent of the employment lull in April after two months of decent growth. However, in April vaccines were getting distributed and job growth going forward looked promising. Today, almost everyone who has wanted the vaccine has received one. This means that another reacceleration of job increases will have to come from elsewhere, probably at the point that the spread of the Delta variant ebbs.



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