So much for Republican claims that cutting unemployment benefits would get more Americans back to work. On Labor Day, the federal government let lapse its COVID-era jobless benefits, including the supplement which provided an additional three hundred dollars per week to those out of work. The theory was that this harsh move would persuade some of the unemployed to get off their couches and take job vacancies which, according to officials figures, have been running at record levels. What happened? The Labor Department’s employment report for September, which was released on Friday, showed that the labor force—which includes people working and others actively seeking work—declined by a hundred and eighty-three thousand, precisely the opposite of what the tough-love theory had envisioned. Many economists predicted that job growth would rebound from what was seen as a weak August, but instead the level fell to its lowest of the year—a hundred and ninety-four thousand.
The pandemic has been befuddling economic prognosticators since its beginning, and it continues to do so. When cases of the Delta variant began to rise sharply this summer, many analysts assumed that it wouldn’t have a major impact on the economy. Despite the fact that about two-thirds of the working-age population has been vaccinated—or perhaps because the other third hasn’t been—it did have a major impact. Fear of the resurgent virus, coupled with related concerns about child care and other factors, have affected employment decisions across the economy. This was evident throughout the new jobs report.
The report is based on two different surveys. In its monthly survey of households, the government quizzes Americans about their labor-market activity. For the first time since February, the number of people who cited the pandemic as their reason for not working increased. With wages rising—especially in low-wage sectors—and job vacancies plentiful, it may have seemed reasonable to assume that the employment rate would rise even without a cut in jobless benefits. Despite all of these factors pointing upward, the participation rate ticked down a bit in September. That rate is now the same as it was in May, when vaccines became readily available to practically all adults—a deflating fact that surely owes a great deal to the rise of the Delta variant.
The government’s other monthly survey, which asks businesses about their hiring, showed a renewed weakness in the sectors that the virus has most directly affected. Bars and restaurants provide the most glaring example. Between January and July, as more of these establishments reopened or expanded their capacity, employment in the industry increased at a monthly rate of about two hundred thousand. In September, it rose by a mere twenty-nine thousand—virtually the same as the figure for August. In the leisure-and-hospitality sector as a whole, employment is still 1.6 million lower than it was before the onset of the pandemic, in early 2020—a shortfall of about ten per cent. Other businesses that showed weak or negative job growth last month included food and beverage stores, which depend on foot traffic, and the makers of motor vehicles and auto parts, who have been hit hard by virus-related supply-chain issues.
The jobs report wasn’t all bad news. Partly because of the drop in the labor force, the official unemployment rate dipped below five per cent. As the back-to-school season arrived, the retail industry added fifty-six thousand jobs. Professional and business services—which includes law, architecture, and technical consulting—added sixty thousand. The courier and warehousing businesses, which have benefitted greatly from the shift to remote activity, together added another twenty-seven thousand jobs. Over all, private-sector payrolls rose by three hundred and seventeen thousand, which is a respectable number.
The headline figure was dragged down by a sharp drop—of a hundred and sixty-one thousand—in state and local-government education. School closures caused by the resurgence in COVID may have been partly responsible for this steep fall, but some of it may well be an artifact of how Labor Department statisticians try to smooth out seasonal variations when they report the monthly figures. “Pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns,” the report noted.
Another positive aspect of the report may already be out of date. The government carried out its household and payroll surveys in the week that began on September 12th, and since then the seven-day average of newly reported COVID cases has declined by about forty per cent, according to the Times. As cases have fallen, some real-time economic indicators, such as the number of restaurant reservations, have already rebounded a bit. If cases continue to fall, spending and hiring should pick up more strongly during the rest of the year. “There’s a case for optimism in the coming months, assuming the pandemic continues to improve,” Daniel Zhao, an economist at the jobs site Glassdoor, noted on Twitter.
The path of the virus remains the key variable. In a blog post after the jobs figures were released, the White House Council of Economic Advisers noted that “the economic recovery will not be complete until the public health situation is under control.” That has been the case since the initial lockdowns began, and it’s still true today. To misquote a James Carville axiom from Bill Clinton’s 1992 Presidential campaign: “It’s the pandemic, stupid.”