Analysis at a Glance
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UNEMPLOYMENT CONTINUES TO DECLINE IN AUGUST DESPITE SLOW JOB GROWTH
The unemployment rate fell by 0.2 percentage points to 5.2 percent in August, inching closer towards pre-pandemic levels of 3.5 percent.
Before February 2020, an increase of 235,000 jobs – the reported increase in employment according to the Bureau of Labor Statistics August employment situation report – would indicate labor market strength. However, with more than 8.4 million persons still unemployed (2.7 million higher than Feb. 2020), August's employment situation illustrates a different picture.
The slowdown of job recovery in August, coinciding with a resurgence in pandemic indicators, lies in stark contrast to gains of over 2 million jobs during the first two months of summer. In August, the number of workers unable to work because their employer closed or lost business due to the pandemic ticked up to 5.6 million from July’s 5.2 million low. Furthermore, 1.5 million individuals were unable to look for work due to pandemic interruptions. The number of individuals on temporary layoff also shows pandemic impacts, ticking up to 1.3 million.
Despite indicators of the resurgence in the pandemic – driven by the delta variant – are weighing on labor market recovery, August also revealed some strong signals. The share of unemployed individuals who have been without work for more than 27 weeks declined by nearly two percentage points, and the number of permanent job losers decreased by over 440,000 compared to July.
There are a few key indicators that remained stagnant in August, including the labor force participation rate. At 61.7 percent, the number of persons employed or actively seeking work in August continued a 14-month trend of wavering within a .3 percentage point margin. It is important to watch in the context of recovery as it provides insight into individuals’ confidence in their ability to get a job. Positive improvements in the labor force participation rate signal optimism in the availability and attainability of quality employment.
LOCAL GOVERNMENTS NET MARGINAL EMPLOYMENT INCREASES IN AUGUST
Non-education related employment drove August gains, rising 19,600; total local government employment is now 572,000 jobs short of pre-pandemic levels.
To recover to pre-pandemic levels, education-related local government employment must increase by about 220,000 jobs while non-education employment must add back over 350,000. A typical local government hiring process takes about four months to fill an open job posting. Aside from the normal processes of hiring (job posting, receiving applications, conducting interviews, presenting offers and gaining approval), local governments sometimes must also seek confirmation from a Board of Commissioners or Board of Supervisors.
Additional logistical steps coupled with competition from private sectors increase the difficulty local governments face in onboarding quality candidates. A recent NACo survey found many counties are reviewing pay structures and offering incentives to re-staff the public workforce. As counties facilitate community economic recovery, there is a focus on re-staffing the local government workforce to efficiently manage the task.
BLACK UNEMPLOYMENT RISES MARKEDLY AS OTHER MAJOR WORKING GROUPS EXPERIENCE IMPROVEMENT
The Unemployment Rate for Black individuals experienced a marked increase in August rising 0.6 percentage points while rates fell for all other major working groups.
The August employment situation report showed that Black workers face an even greater struggle to find employment than their counterparts and are at risk of being left behind by the country’s economic recovery. Over the month, the unemployment rate for Black workers surged to 8.8 percent from 8.2 percent. Additionally, though more Black workers are either working or searching for work, a more significant percentage cannot find a job or are not being hired. Explaining some of this increase, the labor force participation rate for Black workers climbed (and is about tied with the rate for white workers) from 60.8 percent to 61.6 percent signaling an increase in confidence among Black workers.
Among other demographic groups, the unemployment rates for white and Asian workers dropped from 4.8 percent to 4.5 percent and from 5.3 percent to 4.6 percent, respectively. The unemployment rate also declined for adult men (5.1 percent vs. 5.4 percent in July), adult women (4.8 percent vs. 5.0 percent in July) and Hispanic or Latino workers (6.4 percent vs. 6.6 percent in July).
Other notable indicator changes in the August employment situation include:
- The Professional and Business Services sector led the way for job gains while Retail Trade lost the most jobs at 28,500; many other sectors gained marginally
- The Transportation and Warehousing sector increased by 53,000 jobs in August bringing job levels within the sector above pre-pandemic levels
- As one of the biggest sectors yet to recover, the Leisure and Hospitality sector netted not change in jobs weighing on employment this month – likely driven by a pandemic resurgence
- The number of individuals who are not in the labor force and want a job decreased by 835,000, the largest single-month decrease since May 2020.
- August saw the most reentrants to the labor force in 2021 as 200,000 unemployed individuals reentered the labor market
August’s decrease in the rate of nonfarm payroll growth has implications for future economic policy and recovery. Such changes could convince the Federal Reserve to postpone the start of their tapering plan into early 2022 or reduce the amount by which tapering occurs each month. Furthermore, declines in the coming months could negatively impact labor market confidence and slow recovery prospects. However, one month of data does not necessarily indicate a trend. Future releases, along with other labor market data such as weekly unemployment insurance claims, will solidify whether August’s slowdown in recovery is a hiccup or the beginning of a longer slump.
