The economic impact of the delta COVID-19 variant is coming into focus with new numbers from the Bureau of Labor Statistics. While economists had forecasted that employers would add upwards of 725,000 jobs to payrolls in August, today’s report from BLS showed a much smaller gain of 235,000 jobs, well below expectations. This represents a slowdown from June and July, which showed exceptionally high gains of more than 900,000 jobs each month.
“We expected that the delta variant would have at least some impact on economic activity, with individuals adjusting travel plans, events getting cancelled or postponed, and a slowdown in dining and other social engagements,” said Kentucky Chamber Senior Policy Analyst Charles Aull. “Today’s jobs report gives us our first real glance at what that impact looks like, and it appears to be fairly significant.”
As of August 2021, U.S. employers had added back 76 percent of the 22 million payroll jobs lost in the first months of the pandemic. The economy remains more than 5 million jobs short of where it was in February 2020.
Much of the payroll growth in June and July was driven by the leisure and hospitality sector, likely as more individuals felt comfortable dining out and travelling. Growth in this sector flatlined in August, potentially reflecting increased concerns over COVID-19. COVID case rates, both nationally and in Kentucky, began growing exponentially in early July 2021 and are showing few signs of slowing down. Two other key employment sectors that showed meager levels of growth were health care and construction.
Leading areas of payroll growth in August included professional and business services, transportation and warehousing, education, and manufacturing.
The monthly jobs report includes the results of two surveys conducted by the U.S. Census Bureau and Bureau of Labor Statistics (BLS): the household survey, which looks at the labor force, and the establishment survey, which looks at employment and payroll.
Growth in the labor force – individuals working and individuals actively looking for work – remained stubbornly flat in August. The U.S workforce participation rate was unchanged from July at 61.7 percent. Workforce participation measures the percentage of the adult population working or looking for work. Prior to the pandemic, the U.S. workforce participation rate was 63.3 percent. This means that fewer individuals are participating in the workforce today than before the pandemic started. As of June, the was 0.89 individuals look for work for every open job throughout the US. There are simply not enough people looking for jobs to meet demand.
Workforce issues have been especially serious in Kentucky, where our labor force remains 90,000 workers below pre-pandemic levels, as of July 2021. Kentucky’s current workforce participation rate is 56.3 percent, more than five percentage points lower than the national average and three points below where it was in February 2020.
Policymakers and business leaders should continue closely monitoring economic data as it becomes available. With COVID cases continuing to surge, the story told by the August jobs numbers may just be an introductory chapter in this new phase of the economic recovery.
Data on Kentucky’s economy during August will be released later this month.