On The Money — Delta variant wallops job market

Delta variant wallops job market

 

Happy Friday and welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. Subscribe here: thehill.com/newsletter-signup.

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Today’s Big Deal: A dismal August jobs report. We’ll also look at how Senate Democrats plan to pay for their massive spending bill.

But first, a look into the stubborn mind of Joe Biden.

For The Hill, I’m Sylvan Lane. Write me at slane@thehill.com or @SylvanLane. You can reach my colleagues on the Finance team Naomi Jagoda at njagoda@thehill.com or @NJagoda and Aris Folley at afolley@thehill.com or @ArisFolley.

Let’s get to it.

Economy adds just 235K jobs in August as delta hammers growth 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you Friday. 

The U.S. added 235,000 jobs in August and the unemployment rate fell to 5.2 percent as the economy appeared to falter under surging coronavirus cases, according to data released Friday by the Labor Department.

  • Economists had expected employment growth to slow slightly in August to a gain of roughly 750,000 jobs, according to consensus forecasts, amid falling consumer confidence and disruptive school closures. 
  • Declines in restaurant reservations, air travel and other key drivers of the recovery also raised red flags about the August jobs haul.

"Today’s report has the delta variant written all over it. It is clear that the recent surge in COVID-19 cases is a strong headwind to the labor market," wrote Nick Bunker, economic research director at Indeed. I break it down here.

JOBS DAY TAKEAWAYS

Delta homes in on pandemic-sensitive industries: The August jobs report showed setbacks in sectors of the economy hit hardest by the pandemic and crucial to the comeback from its economic blow.

  • The leisure and hospitality sector did not add any net jobs in August as a 42,000-job decline in restaurants and bars wiped out a 36,000-job gain in arts and entertainment. 
  • Employment in retail, another hard-hit sector, also fell by 29,000 thanks to steep losses at grocery stores and building material and garden supply stores. 

“The industry breakdown in employment growth shows clear signs that the increased COVID-19 spread is behind this relatively weak number,” Bunker wrote. “Yet, the labor market is still recovering.” 

Signs of resilience: While job growth slowed significantly in August, the first full month since the delta surge picked up in mid-July, the labor market still showed signs of holding strong.

  • Labor force participation stayed even at 61.7 percent in August and the employment to population ratio — a broader gauge of job market strength — ticked up 0.1 percentage points to 58.5 percent. 
  • The number of Americans who have been jobless for 27 weeks or longer, known as the “long-term unemployed,” also dropped from 3.4 million to roughly 3.2 million. Those who suffer long-term unemployment often struggle to return to work and are hired at lower rates than those without long periods of joblessness.

Stronger days...behind? Upward revisions to June and July’s blockbuster jobs gains were another positive sign for the economy. June’s job haul was revised up from 938,000 to 962,000, and July’s was revised up from 943,000 to 1,053,000 — the first seven-digit job gain since August 2020.  

“The underlying momentum is still there. We just have to see if we can keep up the pace until this surge is behind us,” Bunker said.

 

TAXING BUYBACKS AND SNACK PACKS?

Senate Democrats float taxes on stock buybacks, plastics to pay for spending plan

Senate Finance Committee Democrats are looking at several tax options for paying for their social-spending bill that have not been previously proposed by the White House, including taxes on stock buybacks and materials used to make single-use plastics, according to a document obtained by The Hill.

The Finance Committee is considering a number of ways to raise revenue to pay for the $3.5 trillion reconciliation spending bill. Some of these are similar to proposals the Biden administration has offered, including those to raise the top individual rate and the corporate tax rate.

  • The document floats corporate tax changes that include an excise tax on stock buybacks and an excise tax on corporations with CEO pay that greatly exceeds the pay of the company's average worker. 
  • The list also includes energy-tax proposals, such as a tax on the sale of virgin plastic that is used to make single-use plastics, as well as several possibilities for carbon pricing that would be paired with rebates for low-income taxpayers.

Naomi walks us through it here.

 

FLY THE EMPTY SKIES

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Delta variant's spread hampers Labor Day air travel, industry recovery: The airline industry’s recovery has been grounded by the recent spike in COVID-19 cases, prompting U.S. travelers to cancel travel plans for Labor Day weekend. 

Air travel neared pre-pandemic levels in July — giving the airlines momentum and optimism for a robust fall season — but flight bookings dipped in August amid soaring infection rates fueled by the highly contagious delta variant.  

  • The Transportation Security Administration (TSA) screened less than 1.4 million travelers Tuesday, the lowest single-day total since early May, and a 34 percent decrease from the same day in 2019.
  • Flight bookings for Labor Day weekend were down 15 percent from pre-pandemic levels as of late August, according to Adobe Digital Insights. 

Tori Emerson Barnes, executive vice president of public affairs and policy at the U.S. Travel Association, said the organization is monitoring forecasts that show overall Labor Day travel declining by 10 percent compared to 2019.

“The U.S. economy won’t fully recover until travel recovers, and that includes the return of the critically important business travel and international inbound travel sectors.” The Hill’s Karl Evers-Hillstrom has more here.

 

Good to Know

President Biden on Friday acknowledged the disappointing August jobs report that he blamed largely on the surge in COVID-19 cases, while arguing his administration’s broad plans have been effective at turning the economy around. 

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Here’s what else have our eye on:

  • A group of Democrats on the tax-writing House Ways and Means Committee introduced a bill Friday aimed at encouraging clean-energy production that they're seeking to include in a forthcoming multitrillion-dollar spending package.
  • A small business advocacy group is launching a grassroots bus tour next week to highlight concerns over aspects of the Biden administration's agenda in a preview of the fight to come for the 2022 midterm elections.

 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you next week!