August Unemployment Report Was A Bust – Implications

Last Friday’s jobs report for August was a huge disappointment in terms of new jobs created. Ahead of the report, forecasters predicted there were 720,000 new jobs created last month. Yet the Labor Department reported there were only 235,000 new jobs added in the month, down from about 1 million new jobs created in June and in July.

That’s about as bad as it gets for report misses. Today let’s look at the possible reasons why.

While the number of new jobs created in August was a stunner, not all the news in the report was bad. The headline unemployment rate fell to 5.2% in August, down from 5.4% in July, which was encouraging. And average hourly wages rose 4.3% from this time a year ago, the Labor Department reported, also good.

But the lack of new jobs created in August greatly overshadowed the good news in the overall unemployment rate and the increase in wages. In the wake of the report, most forecasters said the lack of new jobs created last month must have been because many workers did not return to their jobs in August due to fears of the “Delta Variant” of the COVID-19 virus which is spreading widely. Maybe, but that is just speculation.

The overriding question in the jobs market is this: Why are unemployed workers not returning to the workforce? Is fear of the Delta Variant the main reason? I don’t think so.

According to the Labor Department, there are over 8 million unemployed workers in the US today who could take a job if they wanted to. The bigger number is the fact that there are nearly 11 million unfilled job openings which employers are desperate to fill, according to the latest Labor Department report.

Not only that, but workers are also quitting jobs at record rates. This may be due to the fact they know there are plenty of open jobs available, but I think there’s more to it than that. Something else is going on here.

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