The Washington PostDemocracy Dies in Darkness

U.S. economy added a lackluster 235,000 jobs in August, a disappointing month as virus surged

The slowdown comes as jobless aid is about to expire for millions of Americans

A “We're hiring” sign outside a Kohl's department store in Lexington, Ky., last month. (Luke Sharrett/Bloomberg News)
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The U.S. economy added just 235,000 jobs in August, a disappointing month of hiring as the delta variant caused coronavirus caseloads around the country to spike.

The dramatic slowdown in hiring could further intensify a debate in Washington about whether to continue pulling back federal assistance, particularly for lower-income Americans. Jobless aid for more than 7 million Americans is slated to end next week.

The August jobs report fell well below economists’ forecasts and made for a steep drop-off from June, when 962,000 jobs were added, and from July, which was revised upward in the report to 1.1 million jobs added. The slide in hiring tracked closely with an acceleration of new cases and deaths caused by the coronavirus pandemic. The restaurant and retail sectors were especially hard hit, with both shedding jobs last month.

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In mid-July, the United States averaged roughly 25,000 new coronavirus cases a day, according to Washington Post data. By late August, the country was averaging close to 160,000 new cases a day.

The economy’s trajectory continues to vex households, business leaders and policymakers, many of whom have repeatedly misjudged how long it will take for things to return to normal. Many companies are struggling to hire workers, while at the same time many workers are struggling to find jobs. This disconnect has fueled a fierce debate about what the government should or should not do to try to help the economy grow at a time when the pandemic remains a dominating force.

Overall, the country is still down more than 5 million jobs from before the pandemic. The unemployment rate edged down slightly in August to 5.2 percent.

“This has the effects of covid written all over it,” Nick Bunker, an economist at Indeed, said of the report. “That story jumps out. The good news is that while previous surges pushed employment down, this time it seems to have just slowed down the pace of progress, because the overall momentum seems pretty strong.”

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September was supposed to be a milestone in the country’s triumphant reopening after vaccines were created and deployed in record speed.

As cases and government restrictions fell, consumers returned to old patterns, and schools and offices reopened en masse, economists and policymakers envisioned the economy beginning to round a corner, returning to something closer to the normal rhythms of the pre-pandemic world. Congress even set mid-September as a cutoff point for the robust unemployment enhancements that many credit with helping workers pull through the darkest days of the pandemic.

But all of that has been thrown into jeopardy now, as the delta variant dents the economic recovery on multiple fronts. Consumer confidence plunged in August to the lowest level of the entire pandemic, according to the University of Michigan Survey of Consumers. People reported a sense of hopelessness that the health crisis was nowhere near over and that September would not be the return to normal that so many had anticipated.

“Nobody has clarity on what the next year looks like, whether you’re a business or a consumer. Every sector is still facing a lot of disruption,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Federal Reserve economist. “We still have the pandemic posing a head wind to everything we do, from vacations to schooling to return to work.”

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This gloom and ongoing fear of the virus are causing people to pull back on some spending. Restaurant reservations, hotel bookings and airline passengers all declined in August as people grew more cautious. Companies such as Amazon, Google, Apple and Facebook pushed back their return-to-the-office dates for white-collar workers, another blow to the range of businesses that support office work, including local restaurants.

In a telling sign, 5.6 million people said they were “unable to work” because their employer closed or lost business because of the pandemic, Labor Department data shows. That was an increase of about 400,000 people compared with July, a clear sign of the delta variant’s toll on the workforce in the last few weeks.

Restaurant reservations had nearly recovered to pre-pandemic levels in late June, OpenTable data shows, but are now down about 10 percent, which is roughly where they were in the late spring.

In addition to the job losses in restaurants and retail in August, there was a concerning decline in child-care employment and a drop in women’s participation in the labor force, especially among those age 25 to 54. This suggests that, once again, the chaos surrounding child care and school reopenings is forcing moms to stop working in order to care for children.

Employment in the child-care industry fell by nearly 6,000 workers in August and remains down by more than 126,000 workers. Child-care facilities around the country say they are unable to open all their classrooms because they do not have enough staff, especially for infant rooms that typically allow no more than three or four babies per worker. The lack of child care has a ripple effect on the economy as it prevents parents from being able to go to work.

School reopenings are posing a new set of challenges that can also impact the economy. Some school districts have had to instantly shutter after battling outbreaks.

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Overall, this remains a highly uneven recovery. The unemployment rate for Black Americans ticked up in August to 8.8 percent — almost double the White unemployment rate of 4.5 percent. Parts of the country that have lower vaccination rates or that are more reliant on tourism have also had a harder time bouncing back.

Stephanie Pannell, a 53-year-old single mother in Harrison, Ark., who has been out of work since early in the pandemic, says her life has been rocked by multiple crises.

Caseloads have surged in the county where she lives, with only 29 percent of the population vaccinated. Her 14-year-old son is unable to go back to school on a doctor’s orders, because of a respiratory condition he suffers from, until the situation significantly improves.

Pannell has been without any income since the state cut off federal unemployment benefits at the end of June, amid a push by Republican governors to end benefits to purportedly stimulate the labor market.

She says she has applied to some 40 jobs since then, mostly production work in manufacturing facilities in the area, but has yet to receive a call back.

“I don’t know what’s going on,” she said. “They’re saying nobody wants to work. I’ve been trying to work, but they’re not hiring. Or they’re hiring, but not me. I don’t know if it’s my age, or I’m a woman, or what.”

She said she fell behind on rent over the summer but has been catching up after her landlord offered her about 40 hours of work a week to help her stay afloat. She gets paid about $20 an hour to help him do maintenance — cleaning, finishing floors, painting — on apartments and homes, about half of which he keeps in exchange for her rent, she said.

The coronavirus appears to be dragging on several parts of the economy again: Employment in the leisure and hospitality sector, which added an average of 350,000 jobs a month for the last six months, was level in August, as restaurants, bars and other food service establishments shed 42,000 jobs, offsetting some gains made by arts, entertainment and recreation facilities. Retail lost 29,000 jobs.

Restaurant owner Auguste Forrester sighed deeply when asked how business is going at the farm-to-table restaurant he owns with his wife in Conway, Ark., called WunderHaus. He was hopeful in April and May when customers he hadn’t seen for a year came in to dine and said they were eager to get back, but many of those people are staying home again. WunderHaus also used to get a lot of dinner reservations from faculty members at nearby colleges, but many are starting the semester teaching online because of the delta surge.

Meanwhile, staffing has been a huge problem. Most of the kitchen staff walked out in early August, minus the dishwasher and one other person. Forrester now pays $17 an hour to dishwashers and more for experienced staff, but the team is still smaller than it was only a few weeks ago. He’s finding that people just aren’t interested in working in restaurants, even ones like his that source almost all their food from local farmers.

“Every week I interview people, and every week, I’m left with the team I’ve got for the most part,” said Forrester, who now meditates with the team to reduce stress. “People seem to be trying to figure out what they want to do with their life. Washing dishes isn’t what most people are thinking.”

These dynamics have created pressure on the White House, but President Biden projected confidence about jobs and the economy in comments to reporters Friday.

“What we’re seeing is an economic recovery that is durable and strong,” he said, citing the relatively low unemployment rate and the total number of jobs created since he took office. “While I know some wanted to see a larger number today, and so did I, what we’ve seen this year is a continued growth, month after month, in job creation.”

Job growth in August was driven by 74,000 positions added in professional and business services, 40,000 in private education, and 37,000 in manufacturing.

Average hourly wages for workers continued to rise: up about 17 cents an hour, to $30.73, for all employees, though that might reflect the fact that there were fewer low-wage workers hired during the month.

Inflation fears lead Biden to shift economic messaging

In a bright spot, the transportation and warehousing sector added 53,000 jobs last month — bringing it above the levels it had before the pandemic, a sign of the strong growth at companies like Amazon during the pandemic. (Amazon founder Jeff Bezos owns The Washington Post.)

“There is clearly momentum and progress, but covid is a head wind that has slowed down how quickly we’re moving forward,” Bunker said.

Andrew Van Dam contributed to this report.