Virus Cases Slam the Brakes on August Job Growth

The number of jobs added was a third of those expected

Waitress with a face mask and gloves cleaning tables with disinfectant in a cafe
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Drazen Zigic/Getty Images

The labor market’s recovery from the pandemic stalled in August, as concerns about rising virus cases froze hiring in industries—like leisure and hospitality—that have accounted for much of the progress this year.

Key Takeaway

  • The economy added 235,000 jobs last month, the lowest one-month total since January.
  • The leisure and hospitality sector—responsible for much of the economy’s job growth this year—added no jobs in August.
  • A jump in the number of virus cases is affecting businesses that rely on in-person spending, economists said, holding back hiring.

The U.S. economy added 235,000 jobs last month, one-third of what economists expected, seasonally adjusted government data released Friday showed. The results amounted to a sudden slam on the brakes after the economy added more than 1 million jobs in July and nearly a million in June. The monthly growth in August was the smallest since January, when 233,000 people were added to payrolls. Despite the slowdown in hiring, the unemployment rate still managed to fall to 5.2%—the lowest since March 2020—from 5.4% in July.

One of the main culprits in the slower pace of August hiring was a lackluster leisure and hospitality sector, which neither added nor lost jobs last month. The sector has accounted for nearly half of all job gains so far in 2021, as restaurants and other businesses took advantage of heightened consumer demand for experiences outside the house. Even after clawing back some of the losses experienced as a result of the pandemic, these industries are still 10% below their pre-pandemic peak, and rising virus cases are once again affecting businesses that rely on in-person spending, economists said. Restaurants and bars were especially hard hit, cutting 41,500 workers in August—the first decrease since December 2020.

Retail was another sector that experienced job losses, with retail stores trimming their payrolls last month by 28,500 jobs.

The number of people on payrolls is now 5.3 million below February 2020, before lockdowns caused the economy to shed 22.4 million jobs in a matter of months. After an initial burst of hiring last summer, the job market had mostly settled into gradual improvement this year, adding at least 200,000 jobs every month in 2021. The pace of the recovery accelerated in June and July, but some economists have worried in recent weeks that the delta variant of the coronavirus could slow or halt momentum in the jobs market. The numbers for August seem to confirm those fears, economists said, as businesses, jobseekers, and consumers all grew more cautious.

“Ultimately, the Delta variant wave is a harsh reminder that the pandemic is still in the driver’s seat, and it controls our economic future,” said Daniel Zhao, senior economist at job search website Glassdoor.

But, it’s good news the economy added any jobs at all and kept the recovery moving forward, wrote Nick Bunker, economic research director at job search site Indeed. And a record number of job openings leaves plenty of potential for hiring to pick back up in the coming months.

“The underlying momentum is still there,” Bunker wrote. “We just have to see if we can keep up the pace until this surge is behind us.”

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