The U.S. economy added back jobs at a far slower pace in August following an early-summer jump in employment, as an initial wave of reopening hiring waned and concerns over the Delta variant increased.
The Labor Department delivered its monthly jobs report at 8:30 a.m. ET Friday morning. Here were the main metrics from the report compared to consensus estimates compiled by Bloomberg:
Change in non-farm payrolls: +235,000 vs. +733,000 expected and +943,000 in July
Unemployment rate, August: 5.2% vs. 5.2% expected and 5.4% in July
Average hourly earnings, month-over-month: 0.6% vs. 0.3% expected and 0.4% in July
Average hourly earnings, year-over-year: 4.3% vs. 3.9% expected and 4.0% in July
Following back-to-back months of non-farm payroll gains of more than 900,000, employers added back the fewest jobs since January. Still, this marked an eighth consecutive month of net job growth, and brought total employment closer to pre-pandemic levels. The unemployment rate also dipped further to reach a pandemic-era low of 5.2%, while holding above the 50-year low of 3.5% from early 2020.
As of July, the civilian labor force was still down by more than 3.1 million members since February 2020. And the economy has shed a net total of 5.7 million payrolls since the start of the pandemic, with these losses getting recovered at a sluggish pace compared to the swift drop in jobs during the spring last year.
Some of the industries that were expected to still post strong — if slowing — job gains were those within the U.S. services sector. Though the Delta variant may have deterred some from taking high-contact jobs in the past month, bars, restaurants and other services industries have seen some of the strongest consumer demand, and employers have looked to hire to keep pace. Education will also likely offer another strong boost to employment, given that schools have begun to reopen more fully after last year's closures. Local government and private education together added back 261,000 jobs in July.
For the labor market at large, one of the biggest concerns has been around bringing back jobs quickly enough to meet consumer demand and fill widespread vacancies among employers. As of the latest data, job openings were at a record high of 10 million in June, underscoring the supply and demand mismatches still present in the recovering economy.
"There are a lot of jobs but not necessarily a lot of desirable jobs," Peter Quigley, CEO of Kelley Services, told Yahoo Finance ahead of the release of Friday's jobs report. "And while employers are pounding the table wanting workers, workers are frankly taking their time, trying to figure out what jobs are the right fit for them. Job priorities have changed over the last 18 months.
"Employees are looking for something different. They're looking for flexible time. They're looking for remote opportunities. They're looking for enhanced stability in their job. They're looking for well-being programs," he added. "They're looking for up-skilling and career development opportunities. And of course, being in a safe environment and being in a welcoming environment."
And for investors, Friday's jobs report will serve as a critical piece of data informing the Federal Reserve's next move on monetary policy. Many Fed officials have suggested they are looking especially closely at labor market data to determine when they will formally announce and then begin tapering their crisis-era asset purchase program. Another stronger-than-expected jobs report could signal the economy has garnered enough momentum to further progress without the help of a highly accommodative monetary policy tilt.
"On balance, we look for the August employment report to unfold in a manner that would likely count as 'substantial further progress' for many Fed officials," Sam Bullard, senior economist for Wells Fargo, wrote in a note. "Our base case is that we do not look for the Delta variant to derail the economic recovery, and that economic conditions will continue to evolve to the point where officials announce the tapering plan by the December FOMC policy meeting, kicking off the tapering of asset purchases in late 2021 or early 2022."
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