August Jobs Report Preview: Recovery to Slow Modestly As Delta Spreads
Daniel Zhao
Chief Economist at Glassdoor | Sep 1, 2021
This Friday, the Bureau of Labor Statistics will release the August jobs report, which will be closely watched for signs of the Delta variant’s impact on the labor market recovery. The report will be the first since the latest wave of COVID-19 in the U.S. began in mid-July, driven by the Delta variant. Following solid jobs growth in June and July, August's report will demonstrate whether the recovery can continue to power ahead despite the worsening public health situation.
Here are three things I'll be looking for:
- Still strong payroll gains: Payroll gains are likely to decelerate modestly from July. Delta may weaken economic activity slightly, but economic indicators do not yet point to a dramatic slowdown. The tight labor market also means that a small and temporary reduction in labor demand may not crimp hiring. Lastly, payroll gains last month got a boost from the seasonal adjustment for education jobs, and that bump from the seasonal adjustment is not likely to be replicated in August.
- Unemployment to decline slowly: The unemployment rate is likely to continue to decline to 5.3 percent in August. Temporary layoffs are less than 500,000 over pre-pandemic levels, which may mute future declines in the unemployment rate; progress against the unemployment rate is likely to be made in smaller increments going forward.
- Labor shortages are unlikely to abate: Demand for workers remains strong and if anything, the Delta variant may have reduced the number of workers available. Despite reports of labor shortages, hiring in short-staffed sectors like leisure & hospitality has been elevated; however, wages are likely to continue growing rapidly in affected sectors in order to attract scarce workers.
Delta Variant Likely to Exacerbate Labor Shortages
August likely offered little relief for short-staffed employers as the worsening pandemic may reduce the number of workers available. Rising health risks could discourage Americans from working in in-person service sectors, like leisure & hospitality, that were already reporting the most acute labor shortages. Outbreaks at schools could force some Americans to remain at home in order to care for school-age children. Lastly, a weakening economic picture may push some to hold tight in their current roles, limiting the number of workers open to switching employers.
Job search activity, according to Google Trends, has held up between the July and August jobs report reference weeks. The usual summer increase in job search has been more muted in 2021 than 2019, but the gap has not obviously widened or shrunk in the last month, suggesting that job search activity has not surged to meet demand for workers.
Labor demand also remains elevated, with the number of job openings hitting new records for four months in a row, starting in March 2021. While this data doesn't incorporate the impact of the Delta variant yet, even a significant decline in labor demand would leave job openings well above pre-pandemic record highs.
Some employers and policymakers had hoped that the end of federal enhanced unemployment benefits would push more Americans back into the workforce, but any impact from state withdrawals is likely to be mitigated, if not outright overwhelmed, by the Delta variant. Even if enhanced unemployment benefits are slowing jobs growth, it's unlikely that August's jobs report will show strong evidence of that effect.
The (Near-Term) Future of Remote Work
As the Delta variant spreads, companies are pulling back on reopening plans. As a result, more Americans likely worked from home in August. Last winter's COVID-19 wave is a model—the percent of Americans teleworking due to the pandemic rose during the winter and is similarly likely to rise in coming months.
Recent Glassdoor research indicates that job seeker interest in remote work has surged over the course of the pandemic with no signs of slowing, rising 460 percent from June 2019 to June 2021. In August, interest in remote and hybrid work is likely to run in the same direction as employers' increasing concerns about the Delta variant. After the current wave abates, there is an open question of how much remote work will persist. The tight labor market, however, is likely to pressure employers into offering more remote and hybrid options in order to attract and retain workers.
Conclusion
The August jobs report is likely to show an economic recovery that is slowing modestly under the strain of the Delta variant, but is nevertheless progressing forward. While the labor market recovery is not being derailed, uncertainty remains high. If the Delta variant results in a worsening public health situation, the labor market recovery could slow down, or even reverse. The Delta variant is an unwelcome but timely reminder that the pandemic is still in the driver's seat and controls our economic trajectory.
Daniel Zhao
Daniel Zhao is Chief Economist at Glassdoor. On Glassdoor's Economic Research team, he has conducted research using Glassdoor's unique data on a variety of topics affecting job seekers and employers ranging from the health of the job market to pay transparency to employee engagement & retention. His work has been cited in publications like the New York Times, the Harvard Business Review and more. Prior to joining the Economic Research team, he also worked on improving the user experience for Glassdoor’s consumer jobs product and mobile app. He holds a bachelor's degree in applied mathematics and economics from Harvard College.
Tags:Labor Market
