Payroll employment slowed to 235,000 in August, less than a quarter of the pace of the 1.1 million we saw in July. Private sector hiring accounted for those gains and more; government hiring fell after seasonal adjustment. Losses in the public sector were concentrated in education. School administrators have complained that the support staff they laid off when education moved online has been tough to lure back. Fear of contagion is tangible.
The slowdown was most dramatic in sectors that are sensitive to the surge in cases triggered by the Delta variant. Hiring in leisure and hospitality flatlined during the month, with a sharp drop in hiring at restaurants and bars offsetting gains elsewhere. Retailers shed workers along with health care. The biggest losses occurred in nursing homes and home health care, which were hit hardest by the initial surge in fatalities; they have posted declines in 17 of the last 18 months.
Hiring at hospitals slowed as elective surgeries were once again cancelled in the worst affected areas. Reports of workers leaving their jobs mid-shift due to the sheer frustration and stress of treating so many COVID cases for so long is exacerbating the weakness in health care payrolls. A great irony of the pandemic is that it has turned the economics of health care on its ear. Treating COVID patients is costly, in too many ways.
Jobs were added in professional services, manufacturing and construction. Gains in professional services were broad-based, with the exception of temporary help. Many placement firms simply can’t find workers to place, while large employers are looking to make permanent hires. Employment in the vehicle sector snapped back after retooling and losses due to chip shortages in July. Construction gains were concentrated in specialty trades for residential buildings.
Hiring in finance moved up with gains in banking. Investment banks have been booming as companies scramble to get deals done ahead of potential tax hikes in the fiscal 2022 federal budget. Real estate hiring increased, mostly in the rental space as more are forced to rent in the wake of skyrocketing home prices. Speculators are snapping up homes to rent instead of sell.
Average hourly earnings surged 0.6% in August, up 4.3% from a year ago. Wage pressures have moved higher, but this month’s report overstates the upward trend due to a loss of low-wage workers. The composition of employment distorted wage measures more than usual during the pandemic, but the trend of wages is still rising.
Separately, the unemployment rate fell to 5.2%, while the participation rate held steady. A sharp increase in the participation rate by teens was offset by additional losses for Hispanic women.
Hispanic mothers have been the hardest hit by layoffs and the shift to online schooling. The hope was that more would be able to rejoin the labor market once schools reopened. The problem is the uncertainty triggered by the Delta variant; many schools that reopened were forced to quarantine or go back online when cases surged in hotspots.
Teens represent a large untapped resource. The participation rate among teens peaked in 1978 and has been on a long-term and dramatic downturn since then. Changing that would require a shift in norms for both employers and teens, especially given the surge in retirements among older workers with a high school degree or less. They are not willing to risk the hazards of frontline jobs that have erupted in the wake of COVID. That includes the risk of contagion and the challenges of dealing with a belligerent public.
The participation rate among the over-65 crowd appears to have plateaued but remains well off the highs hit prior to the pandemic. We could see another shift down in that participation level in September, given the higher risks of contagion and need for boosters associated with Delta.
The number of people having to accept part-time instead of full-time work for economic reasons fell slightly. However, those reporting the part-time work was due to slack economic conditions actually moved higher. That reflects the blow to demand triggered by Delta. Cell phone data revealed a slowdown in mobility or stepping out to see and be seen in the worst affected states.
The percentage of people working from home has begun to plateau at a little more than 13%. That is way down from the more than 30% we saw with the onset of lockdown. Delta has stalled efforts to reopen offices and will likely nudge that pace higher as we move into fall. Many larger firms have delayed their office reopenings to November or later and even those dates may be aspirational.
Delta is a game changer, wreaking havoc on both the supply of and demand for workers. The devastation will compound with the pace of hospitalizations and fatalities in September. This is at the same time we will be seeing the disruptions and losses triggered by Hurricane Ida kick in. Adding insult to injury is the expiration of supplements and expansions to unemployment insurance on September 6; millions will lose support as their prospect of getting a job deteriorates this fall.
Copyright © 2021 Diane Swonk – All rights reserved. The information provided herein is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic, financial, investment or any other decisions. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.