Expected surge in US hiring dissipates as Covid fears persist

For months, economists predicted that Americans would return to the workforce en masse in September when vaccines raised schools reopened and federal unemployment benefits Timed out.

But those predictions changed when only 194,000 Of the 500,000 jobs expected to have been created last month materialized, the lowest since the beginning of the year, even as the unemployment rate fell to 4.8 percent, the lowest since the pandemic began.

Economists blame a increase in Covid-19 driven by the more contagious Delta variant for changing their predictions of a labor market resurgence and delaying a broader return to normalcy.

“I have a sense of déjà vu that economists have been perpetually over-optimistic about when the job market will take off and when we will see these workers return to the workforce,” said Daniel Zhao, senior economist at jobs site Glassdoor, an online job board.

“I think that, to some extent, there is a valid reason why that has not happened,” he added. “We know that although the schools reopened, the Delta variant was at its peak in September, so we should not have expected our forecasts to be accurate in the context of the Delta variant.”

Even as job growth rebounded earlier this year, the total percentage of Americans participating in the workforce has remained relatively unchanged since the first round of lockdowns began to lift last year.

That trend persisted into September, with a labor force participation rate of 61.6 percent, in the same narrow range where it has stalled since June 2020.

The delta-driven jump in infections has curtailed job searches, even though many large employers are desperate to hire. Retailers are especially enthusiastic to add jobs before the holiday season and wages are rising, but September data indicates some Americans are still hesitant even with job openings at an all-time high.

The labor department reported that 1.6 m Americans said they were not looking for work due to the pandemic, 107,000 more than in August and the first increase to that number since January.

The 309,000 women who stopped working or looked for work last month accounted for a massive proportion of those leaving the workforce, likely due to caregiving responsibilities as Delta’s rise disrupted some school will reopen across the country.

“It almost always happens that the binding element in terms of the labor market is the demand for workers, [and] the presumption in all models is that there is always a sufficient supply of workers and there are always people who can join the workforce as long as there is demand, “said Stephen Stanley, chief economist at Amherst Pierpont Securities.

“What we have seen during the pandemic is a labor shortage at the same time that we have had a high unemployment rate. You’ve never seen that before. “

On Friday, President Joe Biden also blamed the pandemic in a White House speech, saying the employment report did not present an accurate picture of the current job market.

Nonfarm Payroll Deficit Line Chart from Early 2020, m Showing US Employment Recovery Stalls in September

Today’s report is based on a survey that was conducted during the week of September 13. Not today, September 13, when Covid cases averaged more than 150,000 per day, “said the president. “Since then, we have seen daily cases decline by more than a third and continue to trend downward, and we continue to make progress.”

Biden also touted the larger-than-expected drop in the unemployment rate last month. But the drop was not solely due to unemployed workers finding work. The total number of workers decreased, reducing the denominator of the equation that economists use to calculate the unemployment rate.

The mismatch is attributed to changes in the labor market caused by the pandemicas the risk of infection altered workers’ calculation of whether it was worth working in person for low wages.

Those same jobs are also the most sensitive to the public health crisis and are often quickly eliminated or suspended when the number of cases increases. The service industry now employs tens of thousands less than before the pandemic, despite widespread hiring efforts by employers, and may never attract workers in large numbers, Glassdoor’s Zhao said.

An analysis by the Financial Times also showed that the end of federal unemployment benefits was aimed at helping people laid off due to the pandemic to a large extent as well. failed so that the 7.5 million workers who receive $ 300 per week return to the labor market.

With the number of infections and hospitalizations beginning to fall, some economists are hopeful that the anticipated fall rebound may still occur, albeit later than expected. They agree that recovery depends on the Covid crisis.

“This year has been one of false dawns for the job market,” said Nick Bunker, an economist at the job site Indeed. “The demand for workers is strong and millions of people want to go back to work, but job growth has yet to find its base.”

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