Will Delta Variant Derail Growth?
In an overwhelmingly positive employment report, US employers added 943,000 jobs in July. The unemployment rate fell to 5.4%, a sign that the economy is improving. The US Department of Labor reported, “Notable job gains have occurred in recreation and hospitality, local government education, and professional and business services.”
It appears that the rapid rollout of vaccines was one of the biggest job creation plans in modern history. As millions of Americans received their injections, government, state and local authorities withdrew from the strict requirements. States have reopened to businesses and consumers have left their homes and spent money. They traveled, went to sporting events, concerts, played sports, raised a drink in their favorite bar, had dinner in the restaurant and went shopping.
In addition to vaccines, stimulus checks, the savings from working from home, mind-boggling and record highs in the stock market, and skyrocketing real estate prices have made people more confident. This “wealth effect” led to spending, which helped propel the economy.
With almost all of the opening, jobs returned. The job market has heated up so much that there is an active war for talent. Employers are announcing a record 9.2 million job postings. Companies raised wages and offered bonuses to attract people. Walmart and Target offer free tuition to their workers. The hardest hit sectors, such as hotels, restaurants and travel, rebounded strongly. Even with the positive job growth, the US economy remains at around 5.7 million jobs from what it was before the pandemic.
Employers in the leisure and hospitality sector were the big winners. About 380,000 jobs have been created in the sector, which represents more than 30% of total job gains. Education and health services contributed to the addition of approximately 90,000 workers. Professional and business services added 60,000 jobs and transportation added 50,000 jobs.
A somewhat surprising and significant contributor to the July Payroll Report came from government jobs, with a particular focus on education. The government’s payroll increased by 240,000 last month.
Some experts argue that the number of jobs could have been even higher. Concerns over Covid-19, issues with school closures and the inability to find appropriate childcare options, people reconsidering their career choices in the wake of the pandemic and increasing childcare benefits unemployment kept some Americans on the sidelines.
A persistent problem is the number of people who have been out of work for a long time. According to the Ministry of Labor, âthe number of long-term unemployed (those without a job for 27 weeks or more) fell from 560,000 in July to 3.4 million, but is 2.3 million higher than in February 2020 These long-term unemployed represented 39.3% of the total unemployed in July. The number of people unemployed for less than 5 weeks increased from 276,000 to 2.3 million.
Now, for some less good news, the data compiled by the Bureau of Labor Statistics predated the sudden rise in the Delta variant. In recent weeks, there have been an appalling number of cases. This has led the Centers for Disease Control and Prevention (CDC) to recommend that people wear masks indoors, if they are in hot spots.
As a result, companies got angry. A number of companies, including Amazon, Microsoft, Twitter, Google and Wells Fargo, are pushing back plans to return to the office. If the virus continues to spread, the job market may cool down.
Companies may choose to suspend interviews due to uncertainty caused by the new outbreak. Similar to what happened during the early days of the pandemic, some organizations may choose to take time off or downsize, as a preventative measure to cut costs in case things get worse.