The Delta variant of Covid-19 is hitting the US economy as there has been a slowdown in hiring, showing yet another complication for President Joe Biden’s plans to remake the world’s largest economy.
The US economy created the fewest jobs in seven months in August as hiring in the leisure and hospitality sector stalled amid a new spike in Covid infections, which weighed on demand at restaurants and hotels.
American employers added only 235,000 jobs in August, the bureau said as reports show a startling increase in coronavirus cases and deaths across much of the South and Midwest.
Biden, who is negotiating the passage of two massive spending bills through a Congress where even his professed allies have shown a willingness to defy him, claimed he had pulled the country from “economic free fall.”
Speaking at the White House on Friday morning, Biden said despite the impact of the Delta variant on the economy, “what we’re seeing is an economic recovery that is durable and strong”.
“While I know some wanted to see a larger number today, and so did I, what we’ve seen this year is continued growth, month after month,” he adds.
However, the Democratic president acknowledged the job numbers fell short of expectations and added a somber message.
“There’s no question the Delta variant is why the jobs report isn’t stronger,” he said, noting, “We have a lot more work to do.”
He called on Congress to continue to take measures to pass the next steps of his economic and infrastructure agenda.
Biden is urging lawmakers to enact both a $1.2 trillion infrastructure overhaul and a $3.5tr social welfare package.
Last week, however, a moderate senator urged fellow Democrats to delay voting on the latter bill, which cannot pass without his support.
Meanwhile, the Federal Reserve is also paying close attention to the data, as it could have an impact when it begins slowing its massive purchases of bonds meant to help the economy weather the pandemic.
Chair Jerome Powell has signaled that could start by year’s end.
Since April 2020, when unemployment reached a peak in the initial economic shutdown caused by the arrival of the pandemic in the US in the preceding month, 17 million jobs have been gained back.
However, to reach the pre-pandemic number of jobs, an additional 5.3 million new hires would have to happen to reach the 152.5 million jobs recorded in February 2020.
Given 962,000 jobs added in June and another 1.05 million in July, the hiring report of August is disappointing, even as the July figures were revised upwards.
Average monthly employment gains of 586,000 jobs this year indicate how much of a miss this was, with employment in retail falling over the month by 29,000 jobs. In addition to that was a loss of nearly 42,000 jobs in food services.
The number of people saying they lost their jobs because their employer lost business or closed because of the virus increased to 5.6m from 5.2m in July.
“September likely will be weak too, and we’re becoming nervous about the prospects for a decent revival in October, given that behavior lags cases and cases are yet to peak,” Ian Shepherdson of Pantheon Macroeconomics said.