In August, the US economy added fewer jobs than projected, with employment increasing by 235,000.
The result was significantly below the 1.05 million jobs added in July, fueling concerns that the economic recovery is losing speed.
Despite little hiring, the jobless rate decreased to 5.2 percent in August from 5.4 percent in July.
Increasing infections caused by the Delta variety, according to economists, have impacted travel, tourism, and hospitality expenditure.
They further point out that the Labor Department’s data was taken in the second week of August, and so does not account for the effects of storms Ida and Henri in the second half of the month.
President Joe Biden expressed disappointment, but defended his economic record, claiming that it was increasing steadily.
“In the first seven months of my presidency, we created nearly twice as many jobs as any other first-year president,” he added.
“While I understand that some people, including myself, expected to see a higher figure today, what we’ve seen this year is continuous job creation month after month.”
Principal Global Investors’ Seema Shah described the data as “a huge miss” that “screamed Delta disruption.”
She went on to say that the Federal Reserve’s decision to begin removing support for the US economy this year may have to be reconsidered.
“Not only did payrolls grow by less than a third of what was predicted, but the labor market participation rate remained constant, implying that labor supply is still battling to rebound as Covid confidence plummets.”
“The Fed has staked its reputation on the idea that people are starting to return to work, and today’s data will disappoint them.”
Professional and business services, transportation and warehousing, private education, and manufacturing all had significant job growth in August, according to the US Bureau of Labor Statistics.
However, after growing by an average of 350,000 each month over the previous six months, retail employment dropped while leisure and hospitality employment remained unchanged.
While the number of jobless individuals fell to 8.4 million in February 2020, it is still far higher than the pre-pandemic figure of 5.7 million.
The poor statistics might be a fluke, according to Joe Little, chief global strategist at HSBC Asset Management, who noted that average payroll growth has been approximately 700,000 per month over the past three months.
In August, average wages also increased, indicating that companies are attempting to entice workers back due to labor shortages in several areas.
The Need For Employees Still Remains
“The demand for labor remains robust,” Mr Little added, citing record numbers of job postings. “As we go towards the fall, labor shortages will be alleviated by the expiration of further unemployment insurance benefits, as well as increased childcare access when schools reopen.”
However, he warned that a fresh wave of Covid infections might deter some people from returning to work, and that it was “an essential risk to watch.”
During the lockdown last year, the US economy shrank dramatically, but it has since returned significantly in 2021.
House prices are increasing, and corporate earnings are holding up well. However, the United States, like most countries, is dealing with supply chain difficulties that have slowed industrial growth.
As the economy reopens, inflation has risen as well, though the Federal Reserve believes the increase is just temporary.