Delta variant casts shadow on upcoming jobs report
A surge of COVID-19 cases among unvaccinated Americans may have thrown a wrench into the labor market’s pandemic recovery, casting a shadow on the July jobs report slated for release Friday morning.
The Labor Department will publish its monthly employment report Friday amid increasing concern about the economic impact of the delta variant of COVID-19.
Economists are expecting the new data to show hiring remained strong in July thanks to spending on travel, dining and entertainment. The consensus estimate is that employers added 850,000 jobs, the same as June.
But several red flags have since emerged. Private sector data released this week pointed to slowing job growth.
The ADP National Employment report showed a gain of just 330,000 jobs for private payrolls in July, just more than half of the 650,000 consensus estimate among economists. Data from payroll processor Homebase also showed a 0.4 percent decline in the number of hours worked by small businesses in July, while UKG reported a 0.6 percent decline in shifts worked among the companies it tracks.
And even though jobless claims fell by 14,000 in the final week of July, to 385,000, the figures are still higher than the post-lockdown low of 360,000 set earlier in the month.
“People are returning to work. We just haven’t seen the surge of people returning that businesses desperately need. This is true for both states that continue to offer pandemic-related unemployment benefits as well as states where these benefits have expired,” said Dave Gilbertson, UKG vice president, in the company’s July workforce activity report.
The uncertainty created by the delta variant is creating new hurdles for President Biden and congressional Democrats, who are itching to move forward with his economic agenda. While Biden and Democrats enjoyed a burst of public approval soon after passage of the $1.9 trillion American Rescue Plan in March, a recent jump in inflation and mixed messaging from the administration over delta’s risks have dented the president’s approval rating.
Treasury Secretary Janet Yellen said Wednesday the delta variant was “first and foremost” among the challenges facing the U.S. economy, and argued that the country could not afford to pass up a major investment in its economic future after more than a year of suffering.
“We’ve grown used to America as the world’s preeminent economic power. We aren’t destined to stay that way, but with these investments, I believe we will. We have a chance now to repair the broken foundations of our economy, and on top of it, to build something fairer and stronger than what came before,” Yellen said during a speech in Atlanta, where she was visiting small-business owners in her first domestic trip as Treasury secretary.
Yellen also alluded to the growing Republican backlash to Biden’s economic agenda as the administration tries to rally support for both a bipartisan $1 trillion infrastructure deal and $3.5 trillion plan that’s expected to pass with only Democratic votes.
“There is a good faith discussion about how much spending is too much. But if we are going to make these investments, now is fiscally the most strategic time to make them,” Yellen said.
“My largest concern is not ‘What are the risks if we make these big investments?’ It is, ‘What is the cost if we don’t?’ ” she said.
Economists are still split over how much the delta variant will restrain the U.S. economy beyond hard-hit areas. While some states have reimposed mask mandates, none have revisited the kind of restrictions that severely limited consumer spending early on in the pandemic.
It’s unclear how Americans and businesses will adapt to the new COVID-19 surge, even though those fully vaccinated against the virus are highly unlikely to suffer serious symptoms if they do get infected. Rising cases around the world, however, could snarl supply chains that were already overloaded before delta’s emergence.
“The Delta variant and the risks it poses to the overall economy depend upon whether schools reopen on time and whether workers’ return to offices and other indoor venues is delayed until more people are vaccinated,” wrote Diane Swonk, chief economist at Grant Thornton, in a research note this week.
Despite that uncertainty, Swonk said she expects the U.S. to have gained 875,000 jobs in July.
It is also possible that delta’s impact may not show up in last month’s report, which is calculated from surveys taken the week of July 12 — more than two weeks before the Centers for Disease Control and Prevention encouraged Americans to wear masks indoors, regardless of their vaccination status.
A survey conducted July 12-20 by the job posting and recruitment site Indeed found that coronavirus concerns among the unemployed decreased from June — an encouraging sign for workers who had been too afraid to return.
More than 20 percent of job-seekers on Indeed said health concerns were keeping them from taking a job in June, but that figure dropped to just more than 15 percent last month.
Nick Bunker, economic research director for Indeed, also cited declines in the percentages of unemployed workers who said they were not urgently searching for jobs because of child care responsibilities or the ability to rely on their spouse’s income.
“Respondents expressed greater willingness to jump back into work or take new positions. More of these job seekers were willing to do so immediately. The key driving force seemed to be progress against coronavirus,” Bunker wrote.
But he warned, “These gains could be fragile.”
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