U.S. job creation in August was less than one-third of the figure estimated by economists—but it's not time to sound the alarm bells yet.
The jobs report "was disappointing only because it wasn't as good as what we had hoped it would be," said BOK Financial® Chief Investment Strategist Steve Wyett. "We still continue to see improvement in the labor market."
The number of non-farm positions rose by 235,000—less than half the monthly job growth average of 586,000 so far in 2021, according to figures released by the U.S. Bureau of Labor Statistics. Not only is August's new jobs total the worst since January, it's also a far cry from economists' early predictions that the economy would add 728,000 positions.
In addition to the growth of non-farm payroll, albeit less than expected, wages rose slightly and unemployment fell to 5.2%, the lowest it has been in 18 months, according to the report.
Remarking on the data, President Biden said we're seeing "an economic recovery that is durable and strong," despite the impact of the Delta variant. He also noted the nearly 50% decline in child poverty, which was a major aim of the advance Child Tax Credit (CTC) payments that began July 15. The payments, which are part of the American Rescue Plan Act of 2021, are expected to lift 5 million children out of poverty.
Many see August's lower-than-expected job growth as a consequence of the Delta variant of COVID-19, which has caused rising infection rates and concerns. In his briefing on Sept. 9, Biden spoke of the need to make more progress fighting the virus.
Indeed, around 3.2 million Americans told the U.S. Census Bureau that the main reason they didn't work from Aug. 4 to 16 was because they were concerned about getting or spreading COVID. More than 4.8 million said they weren't working because they were laid off or furloughed due to the pandemic, and about 2.5 million said their employer closed temporarily because of the pandemic, causing them to be out of work. Another 1.6 million said their employer closed completely because of the pandemic.
"COVID-19 is still the biggest risk factor for us out there," Wyett agreed. In addition to the more conspicuous ways the virus is affecting the labor market—fear of being infected and declining reservations in the travel and restaurant industries—COVID may be impeding Americans' willingness and ability to return to work in other ways as well, he said.
For example, many schools shifted to remote learning during the previous academic year. That, followed by summer months without childcare, may have kept some parents from returning to work—particularly women, whose re-entrance into the job market during the pandemic has been slower than men's.
"We have to acknowledge that COVID-19 has changed so much about our personal lives, about our economy, about how things are going to be moving forward," Wyett said.
Lack of jobs not to blame
At the same time, the job market—like many industries right now—has a supply chain problem, he noted. While the August jobs report found 8.4 million people unemployed, the number of job openings reached 10.9 million on the last business day of July, according to Job Openings and Labor Turnover Survey (JOLTS) data released Sept. 8.
Two factors often cited as driving unemployment—a lack of childcare and the expansion of unemployment benefits—are less of a factor now. Many schools have now returned to in-person learning, and federally expanded unemployment benefits ended on Labor Day. Both events could bring more jobseekers into the market.
August's lower-than-expected job growth led many commentators to ponder whether the figures are symptomatic of a rocky road to economic recovery or just part of the journey. Too early to tell, Wyett said.
"It's not necessarily that we have to worry yet, but if the next two to three job reports continue to show the non-farm payroll not increasing, then it will be more cause to worry."
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