The US economy added just 194,000 jobs in September, far fewer than expected and the second month of disappointing growth, as the Delta variant and a tight labor market appeared to be holding back hiring.
Economists had expected the job market to rebound in September, adding 500,000 jobs – but the actual figure was lower than the revised figure of 366,000 new jobs added in August, and the smallest gain since December 2020.
Job losses in education were the major factor holding back jobs growth. While most back-to-school hiring typically occurs in September, employment in local government education decreased by 144,000, by 17,000 in state government education, and by 19,000 in private education.
“As we had expected, the lingering impact of the Delta variant continued to weigh on payrolls last month, with leisure and hospitality employment up by only 74,000. But the main disappointment was that, despite the reopening of schools for in-person teaching, overall education employment fell by 180,000,” Capital Economics wrote in a note to investors.
The unemployment rate dipped again to 4.8% in September, and the number of unemployed people fell by 710,000 to 7.7 million. Both measures are down considerably from their highs at the end of the February-April 2020 recession, but remain above their levels before the pandemic (3.5% and 5.7 million, respectively, in February 2020).
The latest snapshot of the US jobs market was compiled in mid-September, when the Delta variant was near its peak in the US. The Bureau of Labor Statistics said 1.6 million people were prevented from looking for work due to the pandemic, little changed from August.
Speaking at the White House president Joe Biden said the the trend of jobs growth “is solid.” “Jobs are up, wages are up, unemployment is down, that’s progress... real progress,” said Biden.
But Biden warned that failing to pass his economic recovery bills, now stalled in Congress, would have long term consequences on the US economy.
“America is still the largest economy in the world, we still have the most productive workers and the most innovative minds in the world, but we risk losing our edge as a nation if we do not move,” he said.
October’s job report will now be very closely watched to see if the last two months are the start of a serious trend or an anomaly, as the US recovers from the worst of the pandemic.
The Federal Reserve recently indicated that it was preparing to rein in some of the massive stimulus programs it enacted to prop up the economy when the pandemic hit. This week’s jobs report may delay that unwinding.
“The disappointing 194,000 gain in non-farm payrolls in September probably still counts as ‘decent’ enough for the Fed to begin tapering its asset purchases next month. But alongside signs that activity growth is slowing sharply, at the same time as worsening labour shortages are putting serious upward pressure on wage growth, it looks set to leave Fed officials in an uncomfortable position over the coming months,” wrote Capital Economics.
