By Chair Cecilia Rouse
Today’s jobs report showed the economy added 235,000 jobs in August, an average gain of 750,000 over the last three months. While the number of jobs added in August came in below market expectations, in large part likely reflecting a resurgence of COVID, the three-month average remains strong. Job gains in June and July were revised up by a combined 134,000. In addition, the unemployment rate fell by 0.2 percentage point to 5.2 percent as labor force participation held steady and the employment rate reached a new pandemic-era high. This is the lowest the unemployment rate has been since the pandemic began.
It is important to focus on the trend of data across multiple months, since any one month of data could be volatile. This report is also a reminder that the economic recovery will not be complete until the public health situation is under control, as reinforced by the rise of COVID cases associated with the Delta variant.
1. Job growth over the last three months has averaged 750,000, up from earlier in the year.
Average job growth from July to August was 750,000 jobs per month (see Figure 1), even as the number of jobs added in August slowed from July. Since monthly numbers can be volatile, it is important to focus on the three-month average rather than the data in a single month, as described in a recent CEA blog.
Nevertheless, the labor market has not fully recovered: employment remains about 5.3 million jobs below its pre-pandemic level, or 3.5 percent lower.
2. We see evidence in this report consistent with Delta affecting the labor market. For example, August job growth slowed markedly in industries that are susceptible to pandemic-driven slowdowns in business.
The August slowdown in job growth was largely driven by leisure and hospitality, government, and retail trade, as seen in Figure 2. Employment growth in leisure and hospitality was almost 380,000 jobs below its previous three-month average, as the sector added no jobs in August. Retail trade saw a slowdown of about 75,000 jobs as it lost jobs. Both of those industries are relatively more susceptible to a pandemic-driven change in consumer behavior, compared with sectors like financial activities, or transportation and warehousing (which, as of this month, is the only major industry to have regained its pre-pandemic level of employment).
Growth in government also slowed, driven by State and local education. Government had seen robust growth in recent months, but lost jobs in State and local education on a seasonally adjusted basis. Seasonal adjustment in education is particularly difficult at the moment, as the school year has adjusted to COVID and as hiring seems to have differed substantially from pre-pandemic patterns. It is unclear what growth in State and local education jobs will look like in the coming months.
3. Another example of the impact of COVID on the labor market is that as COVID cases rose due to Delta, individuals were more likely to say that their work decisions were being impacted by COVID.
The Bureau of Labor Statistics asks individuals if, because of COVID, they teleworked, were unable to work, or did not look for work. In general, as seen in Figure 3, when there are more new cases nationally, there is an increase in the percentage of individuals answering yes to those questions.
In August, workers were slightly more likely to telework or say that they were unable to work due to COVID than in July. This was the first increase in the percent of workers answering yes to these questions since December 2020, when cases were also relatively high. Although the percent of people saying they did not look for work due to COVID did tick down in August, it was a relatively small decrease.
4. The employment rate ticked up 0.1 percentage point overall and 0.2 percentage point for workers age 25 to 54. While no racial or ethnic group saw a decline in their employment rate, the increase in employment for Black workers was particularly large.
The employment rate ticked up to 58.5 percent, the highest it has been during the pandemic. The employment rate for prime-age workers (25–54) rose 0.2 percentage point, also to a new pandemic high.
The employment rate rose 0.3 percentage point for adult men and ticked up 0.1 percentage point for adult women. The employment rate for men is now 4 percent below its pre-pandemic rate, while the employment rate for women is 5 percent below its pre-pandemic rate.
The employment rate held steady for both Hispanic and Asian workers, and ticked up slightly for white workers. It rose 0.4 percentage point for Black workers, driven by a substantial increase for Black women. It should be noted that labor market statistics for demographic groups can be volatile month-to-month.
5. Wage growth has been relatively fast in recent months as employers look to hire.
Wages rose again in August, by 0.6 percent month-over-month. Over the last three months, wages have risen at a 6 percent annualized rate (compared to about 3 percent pre-pandemic). The increase in wage growth has been concentrated among lower-paid workers, likely reflecting employers bidding up wages in an attempt to hire. For example, wage growth among leisure and hospitality workers has been 18 percent at an annualized rate over the last three months, and among leisure and hospitality production and nonsupervisory workers (a category that excludes managers), it was 21 percent. While overall, this means that real wages have fallen through the months for which we have inflation data, lower-paid workers in leisure and hospitality who have experienced extremely fast wage increases have seen their real wages rise.
The relatively fast pace of wage increases likely reflects temporary mismatch between labor supply and demand as the economy continues to deal with a pandemic.
As the Administration stresses every month, the monthly employment and unemployment figures can be volatile, and payroll employment estimates can be subject to substantial revision. Therefore, it is important not to read too much into any one monthly report, and it is informative to consider each report in the context of other data as they become available.