Yahoo Finance’s Javier David reports on the August jobs report, the Delta variant, and why the consumer is not spending as much.
The usual summer doldrums — and one particularly implacable virus — clearly took its toll on U.S. job creation last month.
The market’s most closely watched high-frequency data series was an unmitigated letdown in August, with new jobs checking in at 235,000, roughly a third of consensus market expectations and well below July’s blockbuster reading. It dampened Wall Street’s nigh-unbridled enthusiasm, and set the stage for the Federal Reserve’s next policy meeting.
As has been the case for much of the last two years, the resurgent pandemic was a force multiplier behind August’s weak payrolls. Greg Daco at Oxford Economics told Yahoo Finance Live that “a combination of factors” — including COVID-19 — was leading to softer job creation. He added that it may even create a self-fulfilling prophecy leading to an economic deceleration, “weighing on people’s ability to spend because it’s weighing on income.”
Already, grim consumer sentiment readings have become a canary in that particular coal mine. At a minimum, the report calls into question the Fed’s plans to palliate the economy with stimulative bond purchases (which, depending on who you ask, could either be a good or bad thing).
Yet underneath the hood of the U.S. economy’s job machine, there were at least a couple of reasons for encouragement.
First, the unemployment rate dropped to 5.2%, even as the labor force participation rate stalled out at 61.7%, and prior months of job gains were revised upward. During prior downturns, manufacturing jobs have been loss leaders — but the sector has been among the best performers during this recovery, adding 37,000 positions last month.
Strength in the household survey, as well as gains among underemployed workers, were a reflection of what Goldman Sachs called “improvement in overall employment and a small decline in the number of part-time workers for economic reasons.” Meanwhile, “the number of permanent job losers declined by 443,000, to 2.487 [million],” the bank added.
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