U.S. jobs growth disappoints as recovery falters

The US economy added fewer jobs than expected in August as employment rose by 235,000. The figure was well down on the 1.05 million jobs created in July, adding to fears that the recovery from the pandemic may be running out of steam.

Despite the disappointing hiring levels, the unemployment rate fell to 5.2% in August from 5.4% in July. Economists say rising infections caused by the Delta variant have hit spending on travel, tourism and hospitality.

They also note that the Labor Department’s data was collected in the second week of August, so does not reflect the impact of hurricanes Ida and Henri in the second half of the month.

Seema Shah of Principal Global Investors said the US Federal Reserve could rethink its plans to begin withdrawing stimulus for the US economy this year.

“In a month where so much was riding on the August employment report, this is a major miss and screams Delta disruption,” she said.

“Not only did payrolls rise by less than a third of what was expected, the [labour market] participation rate was unchanged suggesting that labour supply is still struggling to recover as Covid confidence takes another hit.

“The Fed has hung its hat on the assumption that people are starting to return to work, and unfortunately today’s number will be a disappointment to them.”

According to the US Bureau of Labor Statistics, there were notable job gains in August in professional and business services, transportation and warehousing, private education and manufacturing.

However, employment declined in retail and was flat in leisure and hospitality, after increasing by an average of 350,000 per month over the previous six months.

While the number of people unemployed edged down to 8.4 million, it remained well above the pre-pandemic level of 5.7 million seen in February 2020.

Average earnings did jump in August, however, suggesting that employers are trying to lure workers back amid labour shortages in some industries.

Joe Little, chief global strategist at HSBC Asset Management, said the weak jobs figures could turn out to be a blip, noting that average payrolls growth had averaged at around 700,000 over the last three months.

“Record levels of job openings means that the demand for labour remains high. As we head into the autumn, labour shortages will be eased by the expiry of additional unemployment insurance payments plus improved access to childcare when schools return,” he said. The dollar fell on foreign exchange markets after the announcement.

Source: bbc.com