Will the September jobs report reflect a letup in the Delta variant?
Economists expect the month’s data to show a gain of nearly 500,000 jobs, an improvement from August but still behind the July pace.
The resurgence of the pandemic delayed office reopenings, disrupted the start of the school year, and made some people reluctant to accept jobs requiring face-to-face interaction.Credit…Gabriela Bhaskar/The New York Times
Economic data on Friday is expected to show that job growth picked up in September but remained suppressed by the latest coronavirus wave, which led Americans to avoid restaurants and travel and made some reluctant to rejoin the work force.
Economists surveyed by FactSet expect the report, released by the Labor Department, to show that employers added nearly 500,000 jobs in September. That would be double the 235,000 jobs added in August, but far below the more than one million added in July, before the more contagious Delta variant led to a spike in coronavirus cases across much of the country.
Economists expect the unemployment rate to fall to 5.1 percent, the lowest since the pandemic began. But that drop doesn’t reflect millions of people who have left the labor force and so far have been reluctant or unable to return to work.
The data being released on Friday was collected in mid-September, when the Delta wave was near its peak. Since then, cases and hospitalizations have fallen in much of the country, and more timely data from private-sector sources suggests that economic activity has begun to rebound. If those trends continue, job growth could approach its pre-Delta pace later this fall.
“This report is a glance in the rearview mirror,” said Daniel Zhao, an economist at the career site Glassdoor. “There should be some optimism that there should be a reacceleration in October.”
Nonetheless, the recent slowdown shows the economy’s continued vulnerability to the pandemic, and the challenges that will remain even once it is over. There are still millions fewer people on U.S. payrolls than in February 2020, and millions of people have been out of work for six months or more, the standard threshold for long-term unemployment. Yet the number of job openings is at a record high, and many employers report having a hard time filling positions.
Earlier this year, many economists and policymakers hoped that September would be the month when that logjam began to abate, as schools and offices reopened and expanded unemployment benefits ended. That easing hasn’t happened. The resurgence of the pandemic delayed office reopenings and disrupted the start of the school year, and made some people reluctant to accept jobs requiring face-to-face interaction. At the same time, preliminary evidence suggests that the cutoff in unemployment benefits has done little to push people back to work.
“I am a little bit puzzled to be honest,” said Aneta Markowska, chief financial economist for the investment bank Jefferies. “We all waited for September for this big flurry of hiring on the premise that unemployment benefits and school reopening would bring people back to the labor force. And it just doesn’t seem like we’re seeing that.”
Federal Reserve officials are likely to keep a keen eye on Friday’s employment report, as their two jobs — trying to foster full employment while also keeping a lid on inflation — increasingly prove to be a balancing act.
Jerome H. Powell, the Fed chair, and his colleagues have been pumping $120 billion into markets each month and holding interest rates near zero to keep borrowing costs cheap and credit flowing easily, helping to stoke demand and encouraging employers to expand and hire.
Officials have signaled that they will soon begin to slow the bond purchases — something they could announce as soon as November based on cumulative progress in the labor market, even if the September jobs report isn’t a blockbuster. But they have repeatedly promised to continue supporting the economy with low rates for as long as it needs their help. Deciding when it’s time to pull back that aid could be a trickier judgment call than central bankers had expected.
After years in which inflation climbed very slowly — leaving the Fed with latitude to help push the unemployment rate steadily lower — it has taken off in 2021. The pop has been driven higher almost entirely by pandemic quirks. Strong consumer demand for refrigerators and computers has overwhelmed supply chains at the same time as coronavirus-tied factory shutdowns have delayed parts production. The combination has led to shortages for items as varied as rental cars and washing machines, pumping up price tags.
“This is not the situation that we have faced for a very long time, and it is one in which there is a tension between our two objectives,” Mr. Powell said during a recent public appearance. He later added that “managing through that process over the next couple years, I think, is the highest and most important priority, and it’s going to be very challenging.”
That ramps up attention on each of the Fed’s two targets, full employment and steady inflation that averages 2 percent over time.
Central bank officials are hoping that jobs lost during the pandemic return soon, but progress in recent months has been stop-and-start. Economists think employers probably added about half a million jobs last month, up from a disappointing 235,000 in August.
They are also carefully watching inflation, which came in at 4.3 percent in August. Officials expect today’s price pressures to prove temporary. But it has become increasingly clear that, while the drivers are mainly one-offs, they could linger for months. Shipping routes are struggling to catch up, pandemic outbreaks continue to force factory closures, and now a spike in raw goods prices threatens to keep price gains elevated.
The Fed is closely watching to make sure that longer-term inflation expectations remain at healthy levels. Should consumers and investors come to expect higher inflation, they might change their behavior, creating a self-fulfilling prophesy.
Some key gauges of consumer price outlooks have begun moving up. That raises an unhappy possibility: The Fed might find itself under pressure to lift interest rates and cool off the economy before employment has fully rebounded.
While there is little that a central bank can do to spur better port capacity or more apartments, it could arguably cool off demand by lifting interest rates. With fewer consumers buying condos, couches and lawn furniture, factories, homebuilders and cargo ships might catch up, helping to alleviate cost pressures.
But higher rates would also slow business growth and hiring, trapping the pandemic unemployed on the labor market’s sidelines. That’s why Mr. Powell and his colleagues are counseling patience, hoping to avoid overreacting to a price pop that will peter out.
“They’re always walking a tightrope, but that rope is getting a little bit thinner,” said Nela Richardson, chief economist at the payroll and data company ADP. She expects that the Fed will rein in bond-buying with inflation in mind, but doubts that higher prices will prompt rate increases. Fed forecasts have suggested that those will come next year at earliest.
“I think they’re trying to see past this moment,” she said.
The Economic Injury Disaster Loan Advance, an emergency relief program hastily rolled out in the early days of the pandemic, had such poor fraud protections that it improperly doled out nearly $4.5 billion to self-employed people who said they had additional workers — even those who made wildly implausible claims, like having one million employees.
The $20 billion program offered small businesses immediate grants of up to $10,000 in the months after the pandemic shuttered much of the economy. But there was no system to catch applications with “flawed or illogical information,” Hannibal Ware, the Small Business Administration’s inspector general, wrote in a report released on Thursday.
Nearly 5.8 million applicants received grants based on their company’s head count: $1,000 each for up to 10 workers. Sole proprietors and independent contractors who employed only themselves should have collected a maximum grant of $1,000 — but many collected bigger checks.
Some of the claims were outright absurd. Hundreds of applicants received the maximum grants after saying that they employed more than 500 workers, a number that would generally make them ineligible for the small business program. Fifteen said they had one million employees — a figure that would put them in league with Amazon and Walmart.
The report, which described how the agency could have spotted bogus applications by taking even rudimentary steps to prevent fraud, was the latest black eye for the S.B.A. READ THE ARTICLE ->