U.S. job growth slows further in August. What will hiring look like in fall?

WASHINGTON —  What began as a hopeful summer of rapid recovery in jobs has turned more sobering: Employers pulled back on hiring in August, converted more furloughs into permanent layoffs and braced for hard times ahead.

After an unexpectedly strong rebound of almost 5 million jobs in June, payroll gains slowed to 1.7 million in July and weakened further last month, to 1.4 million, the government said Friday.

While the latest increase was bigger than many analysts expected, the August job numbers were inflated by the addition of about a quarter of a million temporary census workers. And the economy is still 11.5 million jobs short of where it was before the pandemic as unemployed workers struggle with lost income, a drastic cutback in federal help and continuing costs for housing, food and other everyday expenses.

The U.S. unemployment rate fell in August to 8.4%, from 10.2% in July and a post-Great Depression record of 14.7% in April, but those numbers don’t include millions of people who have dropped out of the labor force or an undercount of the unemployed due to survey measurement anomalies acknowledged by government statisticians.

California’s jobs report for August will be released in two weeks.

The softer jobs market in August offered new evidence that the economic recovery is losing steam after picking up in May when many businesses reopened. More recently, COVID-19 has been surging in parts of the country previously little affected by the pandemic.

Some economists believe regaining momentum on jobs will be harder in coming months.

“Right now, we’re at a bit of an inflection point,” said Erica Groshen, former commissioner of the Bureau of Labor Statistics, which produces the jobs report. “We’re turning from the very rapid, easy recall of workers to moving workers into new jobs that are needed now, and to the shakeout that is coming from all of the damage that has been done.”

That damage includes business closures, consolidations and other cost-cutting moves that are common in recessionary times. “It’s tough, a big pill to swallow,” said John Neiman, director of operations at Southern California Messengers, which is closing eight out of 13 delivery centers in early October.

Uncertainty is heightened by the continuing medical crisis and the looming presidential election.

President Trump, who earlier focused on what he said was unprecedented economic progress, has now shifted emphasis to trying to blame Democrats and by extension his opponent, Joe Biden, for violence that’s accompanied protests against racism in various cities. The monthly jobs and unemployment figures are considered one of the most important economic indicators, and there is one more report before election day on Nov. 3.

Other labor market data suggest that the slowdown in job growth is likely to continue in September. The Federal Reserve, in a report this week summarizing U.S. economic activity, said hiring had generally turned softer in recent weeks.

For the western region including California, the Fed said: “Employment levels increased marginally on net, but many employers curtailed hiring efforts to control costs in the challenging economic environment.”

California’s labor market recovery from the pandemic has lagged in part because of its heavy reliance on tourism and entertainment. Through August, there’s been almost no recovery in the motion picture and recording industries, which are concentrated in California.

The state’s jobless rate was 13.3% in July, the sixth highest in the nation, and the unemployment picture has worsened lately. Unlike in most other states, new applications for jobless benefits in California rose again last week, to 236,874 claimants, accounting for more than one-fourth of the U.S. total.

“The very high claims in California reflect an economy that has stalled and even gone backward during the renewed lockdowns,” said Michael Bernick, former director of California’s Employment Development Department.

Mary Daly, president of the Fed’s San Francisco-based region, said that what happens with employment from here on will be dictated by the path of the virus.

“Until we’re past COVID, we’ll likely be in a place of fits and starts where we get a little bit of growth, and then of course we have to shelter in place in some things or close particular parts of the economy again,” she told reporters this week.

With many schools holding classes remotely this fall, employers are finding it harder to bring on some new hires even as they grapple with how to provide flexibility to their existing workers who have children at home.

The Fed said agricultural employers in California are struggling with a “dwindling availability of immigrant workers,” and some manufacturers in the Midwest, while stepping up hiring recently, reported that they had little choice “because of elevated rates of absenteeism as workers with a positive COVID test or potential exposure had to quarantine.” Overall, manufacturing payrolls changed little last month.

In August, more than 5 million people not in the labor force were prevented from looking for work because of the pandemic, according to the Bureau of Labor Statistics report Friday.

Nick Bunker, an economist at the job postings firm Indeed, sees further challenges in the labor market recovery. Since mid-August, he said, the biggest drop-off in new job openings has been concentrated in low-wage sectors such as retail and hospitality. Those jobs were the hardest hit by the pandemic. But with many of those furloughed workers already recalled, additional job growth will be harder to come by.

Restaurants and drinking establishments added 134,000 jobs in August, just a quarter of the gains in July and still 2.5 million jobs below February levels.

Retailers bucked the slowdown trend, adding about 250,000 jobs last month, slightly more than in July and the most of any major private industry grouping.

Economists worry, however, that hiring at stores and other businesses will weaken in the fall as budget-strapped states cut staffing and consumers pull back on spending, without additional fiscal support for the unemployed and local governments.

Separate Census Bureau data measuring the pandemic’s impact show a growing number of households struggling financially and with basic needs such as food.

Two-thirds of adults in the Los Angeles metro area reported loss of employment income near the end of July, up from 58.4% in late April and early May. That compares with 51.1% nationally in late July who experienced such income shortfalls.

One bright spot in the economy has been the strong housing market. Demand and prices have surged this summer, thanks in large part to record low mortgage rates. Residential construction has recovered more than 80% of jobs lost earlier this year. But the housing growth, while providing a lift to the overall economy, is largely benefiting higher income households.

“It’s one of the main bad things about this pandemic — it’s reinforcing the disparity,” said Richard K. Green, a public policy professor and real estate expert at USC.

For many small businesses, the next few months will be crucial.

Last month Scarborough Farms, an Oxnard grower of lettuce and other specialty greens for restaurants and markets, gave notice to the state that it would close permanently Aug. 16 and lay off 101 workers. The family business had used up all of its federal money from the Paycheck Protection Program and did what it could to shave costs, including reducing shifts at its warehouse cooler.

But today Scarborough is still in business. Jeff Stein, an employee and spokesman for the farm, said Thursday that Scarborough’s customers have been so supportive that the owners decided to stick it out.

“If everything stays the same, we can make it, but can also tip over,” Stein said. “We’re on the cliff.”