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Delta Drag on August Jobs

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Payroll employment is expected to rise by 675,000 in August after reaching 943,000 in July. Private sector hires are expected to account for about two thirds of August hires, or 475,000. The rest will show up in the public sector.

New jobs in public education likely drove employment in August as schools and universities scrambled to reopen shuttered facilities. Many districts reported difficulty finding workers as fear of contagion remains high. Retirements among teachers and support staff accelerated during the pandemic. Some schools have been forced to quarantine or return to online after opening; most of those closures occurred after the survey week for the August payroll data.

A surge in infections triggered by the Delta variant is expected to slow the pace of hiring in leisure and hospitality. Credit card data show that spending at restaurants stalled in late July and August when infections surged. Mobility, as tracked by cell phone data, dropped in COVID hot spots as hospitals were overwhelmed.

Hiring in health care is expected to slow because elective surgeries have been scaled back or cancelled in some of the worst affected parts of the country. Anecdotal reports of health care workers quitting in the middle of a shift have surfaced as the burnout has intensified. I can only begin to imagine the emotional stress those workers are enduring.

Hiring in manufacturing is expected to pick up as some plants that were idled due to chip shortages started to come back on line. Disruptions to supply chains persist as developing economies in Asia, which escaped earlier waves, succumbed to the Delta variant. Labor shortages and delays due to materials shortages are likely to keep a lid on construction employment. Housing construction has slowed considerably since earlier in the year.

Hiring in professional services and at investment banks represent a silver lining. Recruitment has intensified, along with a surge in business. Deep pockets, cheap debt and a fear of rising taxes have prompted a tidal wave of deal activity for large and midsize firms. Many are scrambling to realize profits from those transactions before taxes potentially rise with the 2022 fiscal package. Brace for a slowdown in that kind of activity in 2022 since much of what we are seeing is just pulling deal activity forward. Hiring in accounting is one of the few sectors that has recovered and then some from losses triggered by the pandemic.

We expect to see average hourly earnings rise 0.3% for August, a slight deceleration from the pace in July. Wages should rise 3.9% from a year ago. The move up in wages is likely to abate as we move into the fall months and more workers return to the labor market.

Separately, the unemployment rate is forecast to hold at 5.4% for August after plummeting to that level in July. An uptick in the participation rate is the main reason that unemployment is expected to hold steady. A surge in pay for low-wage jobs, reopening of schools and an end to expansions and supplements to unemployment insurance are expected to bring back some workers from the sidelines. All of those expansions are scheduled to end on September 6.

The unknown is how much concern about contagion and uneven school reopenings will affect the participation of parents who have young children. The crisis exposed and exacerbated a glaring gap in affordable childcare, which hit single mothers the hardest. An increase in retirements is another hurdle; many who worked part-time are no longer willing to risk the hazards of a frontline job for a few hours of pay.

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