US labor market: fewer new jobs than expected

The US labor market continues to recover – but less strongly than hoped. The US economy created 235,000 jobs in August. More than three times as many new positions were expected.

The upswing on the US labor market weakened unexpectedly sharply in August. The US Department of Labor announced that 235,000 new jobs were created outside of agriculture. In July, more than a million jobs had been created. The unemployment rate fell compared to the previous month by 0.2 points to 5.2 percent.

Analysts had expected a higher increase of an average of around 725,000 jobs. Experts say the high number of corona infections is partly responsible for the slowdown in job creation. “The Delta variant is like a sandstorm in an otherwise sunny economy,” said Sung Won Sohn, economics professor at Loyola Marymount University in Los Angeles, the Reuters news agency. “Without that, employment would have been higher in August.”

Ten million vacancies

Another reason for the weak development on the labor market is therefore also the concern that the current upswing could weaken again. The rampant delta variant apparently prevents employers from hiring people. In some sectors, such as gastronomy, tourism and agriculture, however, there is a great shortage of labor; In many cases, previous employees are currently not coming back.

Due to the acute labor shortage, the companies are also unable to fill the record number of ten million positions. Employers are forced to raise wages. Average hourly wages rose by 0.6 percent in August compared to the previous month – twice as much as economists expected. Compared to the same month last year there was even an increase of 4.3 percent. Some experts fear that wages and prices will rock each other up. In July the rate of inflation was more than five percent.

Corona unemployment benefits are running out

The corona pandemic hit the US economy extremely hard: Employment collapsed at a record pace in spring 2020. In February 2020, the US unemployment rate reached its lowest level in 50 years: 3.5 percent. In April 2020, the rate jumped to 14.7 percent, the highest level since the Great Depression of the 1930s. More than 23 million people were unemployed. Since then, the job market has recovered, but many Americans are still unemployed.

That could change when the Corona unemployment benefit expires next week. Investors in the USA are also currently watching the developments on the labor market with excitement. They assume that the US Federal Reserve will only switch to tighter monetary policy when job losses are no longer a threat. The current low numbers could postpone that further.