August 2021 Jobs Report: Employers Added Only 235,000 Jobs

The American economy slowed abruptly last month, adding 235,000 jobs, a sharp drop from the huge gains recorded earlier in the summer and an indication that the Delta variant of the coronavirus is putting a damper on hiring.

The Labor Department report on Friday follows a sharp increase in coronavirus cases and deaths that has undermined hopes that restrictions on daily activities were nearing an end.

The unemployment rate was 5.2 percent, compared with 5.4 percent in July. Economists polled by Bloomberg has been looking for gain of 725,000 jobs.

“There’s no question that the Delta variant is why today’s job report isn’t stronger,” President Biden said. “I know people were looking, and I was hoping, for a higher number.”

The August showing would have been respectable in prepandemic times. But after gains of 962,000 in June and 1.05 million in July — and with more than eight million people unemployed — it was a sharp deceleration.

“Delta is a game-changer,” said Diane Swonk, chief economist at Grant Thornton, an accounting firm in Chicago. “It’s not that people are laying off workers in reaction to Delta but people are pulling back on travel and tourism and going out to eat and that has consequences.”

She noted that the slowdown in hiring came as the impact of the huge fiscal stimulus earlier in the year was waning. And federally funded unemployment benefits will end after this week, affecting 7.5 million people.

“It’s a hard time to be losing momentum,” Ms. Swonk said.

The scale of the weakness was most apparent in lower-paid industries in which employees deal with customers face to face, like restaurants, bars and hotels. Leisure and hospitality employment in August was unchanged after strong gains in previous months. Retail jobs declined by 29,000. White-collar workers fared better, as did those in manufacturing.

Restaurant reservations on OpenTable were close to normal levels earlier in the summer, but are now 10 percent below where they were before the pandemic. There has also been a sharp decline in hours worked at restaurants and entertainment venues, according to data from Homebase, which provides time-management software to small businesses.

“I think the fingerprints of the Delta variant were all over this report,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “We saw a big pullback in pandemic-impacted industries, and it was a pretty broad-based disappointment.”

The report also showed the first increase since December in the number of people working from home.

Moreover, the Labor Department data was collected in the second week of August, so it may not reflect the full extent of the Delta spread or the impact of Hurricanes Henri and Ida in the second half of the month.

Although many experts expect economic growth to dip in the current quarter from the annualized rate of 6.5 percent in the spring, the economy is expected to remain in expansion mode for the rest of the year.

Gross domestic product has regained the ground lost in the pandemic. The housing market is robust, and Wall Street has been notching records as corporate results remain strong.

Manufacturing has been more muted, held back by supply chain disruptions and shortages of critical parts like semiconductors for automakers.

For Americans who are out of work, robust hiring is essential if unemployment is to get back to the 3.5 percent rate that prevailed before the pandemic.

Despite trillions in stimulus spending and hopes for a resumption of normal business activity amid vaccination efforts, the latest data show just how fragile the economy remains, experts said.

“We got another reminder of how significant the pandemic is in determining progress in our economy,” said Carl Tannenbaum, chief economist at Northern Trust. “It’s a clear indication of what the outbreak has done.”

Ben Casselman contributed reporting.