U.S. hiring slows sharply, casting long shadow on recovery from pandemic

WASHINGTON —  The winding down of summer was supposed to set the stage for a full-throated recovery as kids return to school and workers flood back into offices, but the disappointing August employment report Friday was the latest omen that the economic future looks more cloudy than bright.

Employers added just 235,000 new jobs last month. Most forecasters were expecting three times that number after the economy expanded by about 1 million jobs in each of the prior two summer months. Retail stores and food and drinking places shed jobs last month, and even as the unemployment rate dropped to 5.2%, hundreds of thousands more workers were sidelined from working or looking for jobs.

The explanation, yet again, is that the pandemic has delivered another economic curveball. The Delta variant of the coronavirus has not only struck hard at the unvaccinated but also has spread into groups and age cohorts, such as children, that seemed less affected by earlier strains.

As a result, the wave of consumer spending that was propelling the recovery has faltered. So have the plans of many businesses to move back toward normal operations.

And both manufacturing supply chains and the supply of workers remain troubled.

“We’re still deep in the hole, and without [government] support, plus with the virus raging, I think the rosy scenario for this fall becomes really dark really fast,” said William Spriggs, chief economist for the AFL-CIO labor organization.

President Biden, commenting on the jobs report Friday, sought to reassure Americans that the recovery remains on track.

“While I know some wanted to see a larger number today, and so did I, what we’ve seen this year is the continued growth, month after month, in job creation,” Biden said, noting he had added more jobs than any first-year president.

But the resurgent pandemic has tempered both optimism and economic activity across the country.

Leonardo Williams, 40, opened his second restaurant Monday in Durham, N.C., on the campus of Duke University. But that day, the university announced a suspension of all indoor dining on its grounds. Williams said he still has job openings and recently bumped up the minimum pay to $15 an hour to recruit workers. But the Delta variant has thrown everything up in the air.

“The outlook is a little grim,” he said Friday.

As recently as two months ago, the images in economists’ crystal balls looked decidedly bright. Most signs supported the idea of an accelerating recovery.

The scheduled resumption of in-person classes across the nation’s public school systems would free up thousands of workers — especially women — who had been constrained by child-care needs.

Expanded federal payments to the unemployed, which conservatives and some other analysts had blamed for worker shortages, were ending.

And the expected large-scale return of workers to their traditional workplaces in urban centers would add to the general “opening up” of the economy.

Now, analysts warn that fewer parents and other caregivers may rejoin the labor force right away. More older people, with renewed fears of health risks, could remain on the sidelines or take the plunge into early retirement.

About 400,000 more people in August, and 5.6 million in all, said they couldn’t work due to business disruptions caused by COVID-19. And an additional 1.5 million individuals said the pandemic was preventing them from looking for work, Labor Department surveys show.

“I’m frustrated,” said Cindy Fain, 62, who lives in rural Virginia and has been searching for full-time work since early this year. “I have not been able to do any kind of in-person networking. And I’m definitely very concerned about the fact that there isn’t any clear horizon with this virus.”

Another concern to economists is that younger adults, in the prime of their working lives, are making up a greater share of those hospitalized with COVID-19 than they did last year, according to data from the Centers for Disease Control and Prevention.

And outbreaks at the outset of the new school year in some places have heightened uncertainties about the near future.

The AFL-CIO’s Spriggs was particularly worried about the roughly 11 million jobless Americans, including as many as 2 million in California, who are expected to lose unemployment benefits entirely or the extra $300 federal weekly supplement by Labor Day.

Eviction moratoriums affecting renters also just expired.

The Biden administration should have done more to extend aid, Spriggs said, instead of what he saw as caving to pressure from inflation hawks and turning its focus to longer-term infrastructure needs.

“There is absolutely, positively no way conceivable that the millions of people unemployed suddenly get jobs,” he said.

That doesn’t mean the jobs recovery will reverse or even stall. The economy has added jobs for 15 straight months since getting walloped by COVID-19 in the spring of last year. With the job additions in August, the nation has regained about three-fourths of the 22 million jobs lost early in the pandemic, and the unemployment rate has fallen from a high of 14.8% in April 2020 to 5.2%, much faster than most economists had projected.

Job openings remain at record levels, wages for lower-paying jobs continue to grow nicely, and many companies, thanks to billions of dollars of government loans and grants, are looking to get back on their feet.

Renée Ward, founder of Seniors4Hire.org, a Huntington Beach-based organization that helps older workers find employment, expects seasonal holiday hiring to boost prospects for seniors as well as for young people, for whom she also tries to match jobs. Both groups have had a particularly hard time finding work.

Risks are mounting. After Friday’s jobs report, the economic forecasting firm IHS Markit nudged down U.S. third-quarter economic growth projections to a 3.4% annual rate; it was about 8% in mid-July.

The jobless rate for Black people rose significantly last month to 8.8% and is now almost double that of white and Asian Americans. Unemployment for Latinos edged down to 6.4% in August.

Nick Bunker, chief economist at the jobs posting site Indeed, said he was starting to see the pace of new openings slow in high-contact businesses such as beauty and wellness, dentistry and child care.

Whether there’s a broader pullback by employers in the months ahead depends on the path of the Delta variant, how workers and consumers perceive the risks and to what extent they adjust their lifestyles, he said.

A Gallup poll taken in the middle of last month found that 68% of U.S. adults think the coronavirus situation is getting worse, a dramatic reversal from just two months earlier when 9 in 10 said things were getting better.

About one-fourth of adults are now “completely” or “mostly” isolating themselves from people outside their household, which Gallup said marked the first meaningful movement in this trend since the start of the prior surge in infections in November.

Many Americans, particularly upper-income and more highly educated individuals, have socked away a lot of money in the last 18 months, benefiting from remote work and a high-flying stock market, along with soaring housing prices.

Stocks generally ended lower Friday on the jobs report, although investors found some succor in the thinking that the Federal Reserve may now delay its pullback of some monetary stimulus.

Workers who earn lower wages and have little or no financial cushion face increasing risks the longer the pandemic lasts.

And if their incomes and financial stability are highly compromised, at least some of their pain is likely to spread to the entire economy.

Also, the huge short-term stimulus spending by the federal government is beginning to fade. And Biden’s massive infrastructure program, if it ever passes Congress, will take time to have major economic effect.

“Part of what kept us afloat in the early phases of the pandemic was fiscal policy, and those [stimulus programs] are dwindling or about to dwindle,” said Erica Groshen, senior economic advisor at Cornell University’s School of Industrial and Labor Relations. “How much that will hurt the recovery, we don’t know yet.”

Groshen said that it helped that we’ve learned a lot about the pandemic and how to respond to it, but she also noted that each successive wave increases the risk of more workers leaving the labor force for good and sets further out the date of a full recovery of the labor market.

In downtowns and business districts across the country, many restaurants, dry cleaners and other service businesses were counting on more workers to return this month. But many employers have put those plans on hold.

And for some workers, the pandemic has led to life-changing circumstances and irreversible decisions.

Groshen, for one, moved from New York to Seattle this summer to be closer to family. She is able to work remotely. Her husband accelerated his plan to retire from his university teaching job by taking a buyout.

Whether he looks for new work or not, Groshen said, will depend at least in part on what’s happening with the pandemic. “He’s sitting out in the sidelines for now,” she said.

Times staff writer Eli Stokols contributed to this report.