Delta variant slowed US labor market progress in August

Jason Furman (PIIE) and Wilson Powell III (Harvard Kennedy School)

September 8, 2021
Delta variant slowed US labor market progress in August

The United States economy added 235,000 jobs in August, slower monthly progress than the average pace of over 1 million jobs in June and July and 487,000 for the first five months of the year. The official unemployment rate and "realistic" unemployment rate—adjusted for misclassification in the official figures and to account for the unusually large drop in labor force participation—tell a similar story. They fell by 0.2 and 0.3 percentage points respectively, which also represents less improvement than in July. Job growth at this pace continued to narrow the employment shortfall, but the US economy remains over 7 million jobs short of its pre-pandemic projections.

Long-term employment also continued to fall, suggesting that continued job growth could draw workers who have been out work for some time back into employment. The number of workers unemployed for 27 or more weeks surged as the pandemic progressed, but it never reached the levels of the global financial crisis and has since abated. Workers are better able to maintain their skills and professional connections during shorter spells of unemployment, boding well for future labor market recovery.  

The pace of recovery was likely held back by the spread of the Delta variant and the associated rise in mostly voluntarily social distancing measures. For example, after months of job growth in the leisure and hospitality sector, employment was unchanged in August as consumers cut down on in-person dining and travel. How the current COVID-19 wave will affect labor market recovery in the coming months remains uncertain, but the Centers for Disease Control and Prevention is anticipating cases to plateau in early September. 

This PIIE Chart is based on research in Jason Furman and Wilson Powell III's blog, Delta slows US labor market recovery in August but effect is much smaller than first wave.

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Jason Furman Senior Research Staff
Wilson Powell III Former Research Staff

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