What to watch on jobs day: Labor market growth may slow as the Delta variant surged in August
While the official pandemic recession ended two months after it began, it is clear that the pandemic is not behind us and its ebbs and flows exert powerful effects on economic growth. The seven-day moving average of U.S. COVID-19 cases rose more than fivefold, from 24,000 per day to 126,000 per day between July 12 and August 12, 2021, roughly representing the reference period for each month’s labor market report. The economic effects of this surge will likely be reflected in the jobs numbers we receive on Friday as segments of the U.S. workforce still face health and safety risks of continuing to work in person. This emphasizes the importance of continuing to provide a safety net for workers and their families—including by keeping in place federal pandemic unemployment insurance (UI) benefits—as health and safety-related closures and protective measures are reinstated.
While the job growth numbers in June and July (938,000 and 943,000, respectively) provided strong evidence that the labor market is revving back up in response to fiscal stimulus and widespread vaccinations, it is likely that the August job growth numbers may be more muted. The fivefold increase in COVID-19 cases is likely one of the reasons that restaurant seating appears to have softened between July and August.
While not directly a July-to-August comparison, OpenTable provides data on the change in seated diners for each day in 2021 compared with the same day of the week in 2019. Taking a look at the reference week for the July and August jobs reports, respectively, I found that while seated diners in July was down 5.4% compared with the same week in 2019, the number of diners was down 10.7% in August. Similarly, the first half of July 2021 was down 4.4% compared with the first half of July 2019, while the first half of August was down 9.4% compared with the pre-COVID healthy economy in August 2019. Although the 9.4% drop in seating is still a sizeable decline, it is still far more optimistic than what was experienced as recently as six months ago in the first half of February (-51.9%) or even three months ago in the first half of May (-18.0%). This could mean the labor market may not see the kinds of growth we experienced in June or July, but all signs point to continued job growth.
I’m paying particular attention to restaurants here as leisure and hospitality remains the sector with the largest job deficit and the one hit the hardest in the recession. It’s likely that the strong growth we’ve seen in that sector in recent months will slow as some reduce their social interactions at bars and restaurants. It may also be the case that lower levels of seating will be replaced (at least in part) by more takeout, requiring similar amounts of cooking staff but fewer servers. It may also show up as reduced hours rather than reductions (or a slowdown of growth) in employment. Employment changes in this sector, as well as work hours, will be key metrics to watch in Friday’s jobs report.
Those data, taken together with the recent COVID-19 surge, provide further evidence of the importance of continuing federal pandemic UI benefits to help keep workers and their families afloat. As of now, the expiration of pandemic assistance UI programs—which increased eligibility to include many workers previously not eligible for unemployment benefits and included $300 weekly payments to help workers stay afloat—means 7.5 million workers will lose benefits next week. This is more than five times as many workers who faced a benefits cliff following the Great Recession, including more than 10 times the amount of vital funds. These benefits are not only providing economic security to workers and their families, they are also feeding the recovery as the economy opens up.
Other important indicators to track on Friday include the unemployment rate, particularly long-term unemployment, as well as labor force participation to ensure that any decline in the unemployment rate is happening for the right reasons as more workers return to the labor market in search of jobs.
I will also be keeping an eye on labor market disparities by race and ethnicity. As the recovery continues to develop, I hope we will see more progress for the most historically disadvantaged groups in our economy. Black and Hispanic unemployment rates remain high at 8.2% and 6.6%, respectively, compared with a white unemployment rate of 4.8%. The persistence of these unemployment disparities means that white unemployment rates have already recovered to levels lower than Black workers experienced pre-COVID, a time when many applauded the success of historically low Black unemployment. We must continue to prioritize full employment to narrow racial gaps and improvement the economic prospects for all.