The U.S. economy added back jobs at a far slower pace in August following an early-summer jump in employment, as an initial wave of reopening hiring waned and concerns over the Delta variant increased.
The Labor Department delivered its monthly jobs report at 8:30 a.m. ET Friday morning. Here were the main metrics from the report compared to consensus estimates compiled by Bloomberg:
Change in non-farm payrolls: +235,000 vs. +733,000 expected and a revised +1.053 million in July
Unemployment rate, August: 5.2% vs. 5.2% expected and 5.4% in July
Average hourly earnings, month-over-month: 0.6% vs. 0.3% expected and 0.4% in July
Average hourly earnings, year-over-year: 4.3% vs. 3.9% expected and 4.0% in July
Following back-to-back months of non-farm payroll gains of more than 900,000, employers added back the fewest jobs since January. Still, this marked an eighth consecutive month of net job growth, and brought total employment closer to pre-pandemic levels. The unemployment rate also dipped further to reach a pandemic-era low of 5.2%, while holding above the 50-year low of 3.5% from early 2020.
The previous two months' worth of payroll gains were upwardly revised, however. July's payroll gain was upwardly revised to more than 1 million from the 943,000 reportedly during the previous month. June's job growth came in at 962,000 payrolls, up from the 938,000 previously posted.
As of August, the civilian labor force was still down by more than 2.9 million members since February 2020. And the economy has shed a net total of 5.3 million payrolls since the start of the pandemic, with these losses getting recovered at a sluggish pace compared to the swift drop in jobs during the spring last year.
One of the main factors contributing to the major miss on headline payrolls growth was a slowdown in hiring in the U.S. services sector, which had previously seen strong employment gains in the early stages of the recovery. Leisure and hospitality industries added zero payrolls on net in August after adding 415,000 in July. Education industries also contributed far fewer payrolls last month than during July, with private education roles rising by 40,000 in August while declining by 21,000 in government education. Government and private education together had added more than 200,000 payrolls in July.
Other areas of the economy saw stronger job growth, however. Manufacturing jobs rose by a better-than-expected 37,000 last month, with more than 24,000 of these comprising motor vehicles and parts jobs after months of supply and labor constraints.
For the labor market at large, one of the biggest concerns has been around bringing back jobs quickly enough to meet consumer demand and fill widespread vacancies among employers. As of the latest data, job openings were at a record high of 10 million in June, underscoring the supply and demand mismatches still present in the recovering economy.
"There are a lot of jobs but not necessarily a lot of desirable jobs," Peter Quigley, CEO of Kelley Services, told Yahoo Finance ahead of the release of Friday's jobs report. "And while employers are pounding the table wanting workers, workers are frankly taking their time, trying to figure out what jobs are the right fit for them. Job priorities have changed over the last 18 months.
"Employees are looking for something different. They're looking for flexible time. They're looking for remote opportunities. They're looking for enhanced stability in their job. They're looking for well-being programs," he added. "They're looking for up-skilling and career development opportunities. And of course, being in a safe environment and being in a welcoming environment."
And for investors, Friday's jobs report served as a critical piece of data informing the Federal Reserve's next move on monetary policy. Many Fed officials have suggested they are looking especially closely at labor market data to determine when they will formally announce and then begin tapering their crisis-era asset purchase program. Another stronger-than-expected jobs report could have signaled the economy had garnered enough momentum to further progress without the help of a highly accommodative monetary policy tilt.
"Even allowing for the fact that first estimates for August often disappoint on the downside, the extent of the slowdown in jobs growth all-but rules out any tapering announcement at this month's FOMC meeting and, if this weakness persists, then it could be pushed into early next year," Paul Ashworth, chief U.S. economist for Capital Economics, wrote in a note on Friday.
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