The jobs recovery suffered a major stall in the U.S., falling short by nearly 500,000 jobs, which officials projected would be recovered in the month of August. According to the Bureau of Labor Statistics (BLS), there are 8.4 million unemployed people in the United States.
During the month of August, the economy added only 235,000 jobs, while economists were estimating a growth of 720,000 new jobs during that month.
In the month of July the economy created about 943,000 new jobs, so August represents a drop of almost 708,000 jobs.
The unemployment rate fell 0.2 percent in August, from 5.4 percent in July to 5.2 percent this month. Wages increased by 0.6 % in the previous month. Year-over-year wages are up 4.3%. Hourly earnings in all nonfarm jobs increased by 17 cents, bringing the value of the average hour worked in the U.S. to $30.73.
The growth in wages reflects the problems employers have had in attracting new staff, so many have opted to raise wages, while others are offering to give away a Tablet, bonuses of up to $1,000, or finance a cell phone plan.
The premature lifting of unemployment benefits in 23 states does not seem to have encouraged people to seek employment, and there are currently a record 10.1 million job openings in the United States.
According to The Wall Street Journal, the slowdown in the jobs recovery will cause the Federal Reserve to back away from reversing its expansionary monetary policy. In the most recent meetings among members of the Fed’s Open Market Committee, several officials considered the possibility of beginning to limit the purchase of corporate and government debt, which is amounting to the purchase of $120 billion in debt bonds per month.
The job recovery suffered its biggest setback since the economy started to pick up again
Although there has been no official statement yet, it is possible that the FED may decide to continue with debt purchases for a few more months. Jerome Powell, FED’s Chairman, has stated that he will maintain the Fed’s expansionary monetary policy until the fall of 2023.
Job growth is also being affected by the spread of the delta variant in the United States, which has become the most infectious strain of the coronavirus to date.
The high transmissibility of the delta variant has particularly impacted the food, tourism and entertainment sector which after growing at a rate of 350,000 new jobs over the previous 6 months, is now laying people off and hiring not only slowed, but fell to negative values; in August this sector reduced the number of jobs by 1.7%.
Other sectors such as education, which had been a key part of the recovery, also lost preponderance. While private education added 40,000 jobs in August, state education was down by 21,000 jobs, and fell by 6,000 jobs for local schools.
Manufacturing generated 37,000 jobs, while the information sector added 17,000 jobs; meanwhile, the financial sector created 16,000 jobs during August. The Retail industry was one of the hardest hit, losing 29,000 jobs.
After boasting in May of having “created” 1.5 million jobs, the Biden administration is facing the biggest drop in job creation since the economic recovery took off.