When the U.S. economy added far fewer jobs than economists expected last month, a vital question arose: After job openings around the country set a new record high for five straight months, was the spike in coronavirus cases forcing employers to scale back their hiring plans? Or were the jobs still available and it was just that people weren’t taking them?
It’s both, economists say—but likely enough the latter that job hunters shouldn’t feel discouraged. Evidence generally points to the ball still being in the worker's court, with wages rising faster, initial claims for unemployment ticking down, and an increasing share of small businesses saying they’re struggling to fill positions.
- The delta variant of the coronavirus put a wrench in the expected labor market recovery, and August job growth was a fraction of July’s.
- Economists read the August decline as evidence of less interest on the part of job hunters, not as a major retreat in employer hiring plans.
- Higher wages and other data still generally points to the ball being in the worker’s court, not the employer’s, at least for now.
- If you’re looking for a job, there’s still a good chance you’ll find one, economists say.
“I don’t think we’re at the point yet where workers are losing the upper hand,” said Nancy Vanden Houten, lead economist at Oxford Economics. “The inability to hire workers is significant. The biggest factor in resolving that is the course of the pandemic.”
As with many things, the trajectory of the job market changed after a spike in virus cases caused by the delta variant of the coronavirus. Government data showed just 235,000 jobs were added in August, the least for any month since January, and less than half of what economists expected.
Indeed, when summer began, life was looking brighter as more people received the COVID-19 vaccines, people started going out again, and the economy was adding roughly a million jobs a month to keep up with the surge in demand for things like a dinner out.
By fall, the thinking went, schools would go back to in-person teaching, and harried parents would be able to take a job in confidence, as memories of remote learning and daycare shutdowns faded—not to mention worries about their own exposure to the virus.
To top it off, expanded emergency unemployment benefits, which some observers blamed for keeping workers on the sidelines, were set to expire—and they did—on Sept. 6. Higher starting salaries, signing bonuses, and other perks being offered by needy employers would become increasingly effective. Conditions would finally be right to draw more people into accepting positions.
Waiting It Out
But when virus cases surged over the summer, many job hunters likely decided to wait it out, said Sarah House, a director and senior economist at Wells Fargo. She pointed to evidence that employers are still craving workers as they struggle to keep up with soaring consumer demand that’s grown the economy to beyond its pre-pandemic peak this year.
Last month data showed the scales haven’t tipped this much toward workers in at least the last five years that the National Federation of Independent Business Research Center has been surveying small business employers: Half said they were having trouble filling positions and 32% planned to up their hiring efforts in the coming months. Two of the top reasons hiring is difficult? People have childcare or other family obligations at home, and candidates aren't feeling safe to return to work, according to a separate survey taken by American Express’s Kabbage in late July through mid-August.
Higher Wages, Perks
The need for help is driving up wages more quickly than before the pandemic, even in the high-contact restaurant and bar sector, where House reads the decline in payrolls in August as a sign that people may not want those jobs, not that there’s less of a need. Companies like Amazon continue to raise starting salaries and add perks, like signing bonuses and education benefits, for hourly employees. Walmart, Target, Chipotle, and Bank of America all have upped their average starting rate in the hunt for more workers.
To be sure, some employers have probably become more cautious about hiring as they wait to see how the delta variant impacts the economy, said Vanden Houten. And the government reports monthly data on job openings five weeks after it reports on the payrolls, so we only know there were a record 10.9 million available jobs as of the end of July; we don’t yet know about August.
But the spike in wages makes it likely that demand for workers continues to strengthen, Conrad DeQuadros and John Ryding, economic advisors at Brean Capital, wrote in a recent commentary. Between May and August, the average hourly wage increased 1.4%, double the three-month increase seen just before the pandemic began, government data shows. And those restaurant and bar wages? Average hourly pay for non-supervisory workers increased 1.3% in August, double or more the gain for any month in the two years before the pandemic.
'What's the Hurry?'
There’s comforting evidence, too, for people who have a job. The weekly volume of initial claims for unemployment benefits is headed down toward pre-pandemic levels, suggesting few layoffs. And nearly a third of small businesses surveyed by Kabbage said they had reallocated unused funds meant originally for new hires to increase the wages of existing staff.
Research shows that workers are indeed feeling pretty confident about finding a job. The Conference Board, a research group, revealed in its August consumer confidence survey that 54.6% of people believe jobs are plentiful, nearly the biggest share since 2000. More people are quitting, too. The rate at which people are voluntarily leaving their jobs has only been higher once (in April) in more than 20 years that the government has tracked it.
“What’s the hurry if you believe a job will be there when you’re ready and now is not your only opportunity to find employment?” House said.
While the economy has added back most of the 22.4 million jobs lost in a matter of months, there were still 5.3 million fewer jobs in August than in February 2020. Some have blamed the extra federal unemployment benefits for discouraging people from returning to the workforce, though studies show it wasn’t a big factor. (Some Republican governors—hoping to reduce the labor shortage—withdrew their states from the programs months before the Sept. 6 expiration date.)
Some of the failure to fill open jobs may come down to a mismatch between the kind of opportunities there are and the skills and training people have, House said. The unemployment rate, at 5.2%, is at its lowest point of the pandemic but is still higher than the pre-pandemic range of 3%-4%, and it includes people who want to work but don’t want to transition to a different career.
Because of that and other factors, the end of federal unemployment benefits likely won’t make a big difference immediately, House said.
“Just because the calendar flipped to Sept. 6 doesn’t mean you’re going to see everyone go out and get a job,” she said.
The End of Extra Benefits
Eventually, though, the end of the extra benefits will have more of an effect, pushing some people back to work, House said. Investment bank Goldman Sachs, for example, predicted it would boost job growth in the U.S. by 1.3 million jobs by the end of the year.
This, coupled with any improvement in pandemic conditions, could begin to swing momentum away from workers, making August’s downturn more of a blip for the labor market than a sustained turn for the worse.
“We’re not expecting a big step back here,” Vanden Houten said. “We continue to be humbled by the course of the virus. But I don’t think we’re at a crossroads. We’re just slowing down a bit. We’re optimistic job growth will pick up again.”
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