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America’s rebound in covid-19 overwhelms its rebound in jobs
The Delta variant saw hiring slow dramatically, especially in industries with high covid-19 risk
IN RETROSPECT it seems so obvious. A non-farm payroll report published on September 3rd showed that 235,000 jobs were created in America in August, down from a monthly average of more than 1m since June. The sharp deceleration came as daily covid-19 cases soared to their highest levels since the start of the year. In driving up America’s covid-19 infections sharply, the fearsome Delta variant also weighed down the economy.
Surprisingly, though, the soft patch caught most economists off guard. They had expected 720,000 new jobs, according to a survey by Dow Jones, a newswire. The Delta variant’s fingerprints were all over the slowdown. Hiring all but stopped at workplaces that bring people into close contact with each other, notably restaurants. The hospitality and leisure sector went from creating a monthly average of 350,000 new jobs over the past six months to none in August. Dining out and the pandemic do not mix well together—or rather, from an epidemiological standpoint, they mix together too well.
The weak jobs report will probably make the Federal Reserve inclined to wait before beginning to unwind its extraordinary stimulus measures. Some analysts had thought the central bank might announce “tapering”—a reduction in its monthly purchases of bonds—in September. A delay may now seem more prudent. The unemployment rate continued to edge down, but there are still nearly 6m more Americans out of work than before the pandemic. The economy remains far from the Fed’s goal of “maximum employment”.
The report also underlined just how complicated the Fed’s task is at the moment. The slowdown in job creation stemmed in large part from tightness in the labour market, with people still hesitant about getting back into the hurly-burly for the working world. Wages rose by 0.6% compared with July as employers struggled to fill vacancies. That is likely to add to inflationary pressures, which could ultimately push the Fed to begin tapering earlier than it would otherwise like.
The bigger story, though, is how much the pandemic still affects the economy. A decline in daily new infections over the past week raises hope that the Delta wave may be cresting, but forecasts are mixed. If cases fell, it could pave the way for stronger job performance in the coming few months. That would be a welcome shot in the arm.