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Why wasn't there more job growth in the US labor market according to reports?

The latest jobs report from August was a disappointment, missing analysts' forecasts, economists say the culprit is the surge in covid-19 cases.

The latest jobs report from August was a disappointment, missing downgraded forecasts, economists say the culprit is the surge in covid-19 cases.

The August jobs report missed forecasts increasing just over a third of what analysts had expected. Although the 235,000 new jobs would be a good number for August in a normal year it was the lowest rate of growth in seven months. Furthermore, much lower than the over 900,000 jobs created each of the previous two months.

The US economy remains over 5 million jobs short of where it was before the covid-19 pandemic created levels of unemployment not seen since the Great Depression. Economists point out that covid-19 is still shaping the economy and the economic recovery as new cases surge due to the spread of the Delta variant.

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Leisure and hospitality industry most affected by Delta surge

The covid-19 lockdowns forced businesses to close their doors and people to work from home that could. Those most affected were workers in the leisure and hospitality industry. This sector of the economy has been a driving force in the recovery as the US economy climbs out of the depths of the economic crisis. Over the past six months an average of 350,000 jobs have been added per month in this sector according to the Bureau of Labor Statistics data.

However, in August employment in leisure and hospitality was unchanged. Bars and restaurants actually shed 42,000 jobs in the latest employment report from the Bureau of Labor Statistics. This sector of the economy still has 1.7 million jobs vacant that existed in February 2020 prior to the pandemic despite businesses complaining that they can’t find workers to fill positions available.

The Delta variant has led to a return of mask mandates across the nation and a renewed call for people to take precautions to protect themselves from the virus. This has led to some cancelling their travel plans, especially to areas with high rates of infection as even those who are vaccinated run the risk of catching the highly transmissible covid-19 Delta variant.

Concerns over getting infected could explain why people aren't returning to work in occupations where workers have close contact with the public. Many parents were expected to return to the workforce once schools reopened alleviating difficulties with child care but the latest surge of covid-19 has thrown a wrench in schools' reopening plans across the nation.

“The pandemic is in the driver’s seat of the economic recovery”

Daniel Zhao, a senior economist at Glassdoor, in his analysis of the August jobs report said “Storm clouds from the Delta variant muted jobs growth in August in a harsh reminder that the pandemic is in the driver’s seat of the economic recovery.” The latest numbers showed a dramatic slowdown, with just 235,000 jobs added, less than a quarter of the revised July job creation which saw the first gain of over a million jobs since August 2020.

The fourth wave of the coronavirus driven by the highly transmissible Delta variant is forcing companies to reconsider their reopening plans. The share of American workers who were performing their job from home rose slightly to 13.4 percent in August. Zhao predicts that this resurgence in working remotely will likely delay the economic recovery further for areas that depend on office workers.