Preview: What to Look for in August Jobs Report

09/01/2021 12:00am

(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, September 3 at 8:30 AM Eastern Time.)

We have seen extraordinarily rapid job growth in the last three months. The 943,000 job gain reported for July brought the three month average to 832,000. We are likely to see somewhat slower growth in August. We are still down 5.7 million jobs from the pre-pandemic level, but most of the easily filled jobs have already been filled.This is seen in part by the sharp drop in the share of the unemployed who report being on temporary layoffs. This had peaked at 77.9 percent last April. It is now down to 14.3 percent, a share that is not unusually high. Given the sharp drop in the number of unemployed workers on temporary layoff, and the unusually high share of long-term unemployment, we are likely to see job growth closer to 500,000 than the extraordinary pace of the last three months.

Hard-Hit Sectors Continue to Lead Growth

The sectors that lost the most jobs are again likely to show the largest job gains in August. Restaurants added 253,000 jobs in July, but employment is still 980,000 below the pre-pandemic level. We are likely to see more jobs in this sector in August, but the gain will almost certainly be considerably less than in July.

Wages are rising rapidly in the sector, and many restaurant owners complain about being unable to afford higher pay. In many cases, this is likely true, which means some restaurants may close. Even when the economy is fully recovered, employment is likely to be lower in the sector than before the pandemic. Real spending in the sector is already above its pre-pandemic level. Since employment is still more than 8.0 percent below the February 2020 level, this implies large gains in productivity.

Employment in hotels is still down by 264,000 (12.5 percent) from its pre-pandemic level, after the sector added 76,000 jobs in July. We are likely to again see strong job growth in the sector, although less than we saw last month. The entertainment sector added 53,000 jobs in July, but is still 403,000 (16.1 percent) below its pre-pandemic level. We may see somewhat more rapid growth in August as more venues reopen.

State and Local Government Employment

Employment in state and local governments is still 808,000 below its pre-pandemic level. A bit less than half of this is in education. With the American Recovery Act funding, most state and local governments should have the resources to rehire laid-off workers. Presumably, most of these employees will be rehired in the next few months.

Wage Growth

We have been seeing rapid wage growth in recent months, especially in the hotel and restaurant industries. The average hourly wage overall is up 4.1 percent for the last year. That is somewhat more rapid than the pre-pandemic clip, which was just over 3.0 percent.

Pay for production and nonsupervisory workers in restaurants is up 13.0 percent from its year-ago level. It has been rising at annual rate of 24.3 percent for the last three months (May, June, and July) compared with the prior three months (February, March, April).

It will be important to see if this pattern continues. Very rapid wage growth can lead to higher inflation if it is not accompanied by higher productivity growth. (We actually have been seeing more rapid productivity growth since the start of the pandemic.) But it is also important to recognize that we can have more rapid wage growth for workers at the bottom without causing serious inflationary pressures since their wages are so low. 

Long-Term Unemployment

The share of long-term unemployment has been unusually high in this recovery. Following the Great Recession, we first saw unemployment fall to 5.4 percent in March of 2015. At that point, the share of the unemployed who were long-term (more than 26 weeks) was 29.8 percent. By contrast, it was 39.3 percent in July. If we get another month of healthy job gains, this share should fall sharply.

Weekly Hours

One way that employers would be expected to respond to a labor shortage is by increasing hours for the workers they have on staff. There continues to be no clear trend in hours. Overall, average weekly hours stood at 34.8 in July. That is up from an average of 34.4 in 2019, but down from a peak of 39.0 in January.

Part of these movements is a composition effect. If we look at production and nonsupervisory workers, there is a rise from 30.3 hours in retail in 2019 to 30.8 in July. But this is down from a peak of 31.1 in March. Hours in leisure and hospitality have been increasing, with the 25.3 hours reported for July tying the peak hit in April, and up from 24.7 hours in 2019.

Quit Rates

If workers feel confident about their labor market prospects, we should see a rising share of unemployment due to voluntary quits. The share of unemployment due to voluntary quits rose 0.9 percentage points to 10.8 percent. However, this is still low. It should be around 14-15 percent in a strong labor market.

Black Teen Unemployment

Black teen unemployment has been at record low levels. It fell to 9.3 percent in June, a full 8.0 percentage points below the previous low. It rose to 13.3 percent in July, but this is still lower than any recorded pre-pandemic level. The data for Black teens is highly erratic. However, these rates are so far below historic levels, it must indicate an improvement in their labor market prospects.

Self-Employment

The number of people who reported being unincorporated self-employed rose by 425,000 in July, which puts it 700,000 above the 2019 average. This could mean many people are starting small businesses as a result of changes in their situation in the pandemic.

It is worth noting that most of the upturn in COVID-19 cases was already in full swing by the end of July.  While case numbers have continued to increase through August, this report should give us a pretty good measure of how the Delta variant is affecting the labor market.

Also, most states with Republican governors had ended their $300 weekly unemployment insurance supplements, as well as their special pandemic programs by July. The analyses of the differential effects across states found that withdrawing these supports had little effect. At this point, it is not plausible that these programs are having a major impact in deterring employment.

CEPR produces same-day analyses of government data on inflation, employment, GDP and other topics. 
Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.
 

Support Cepr

APOYAR A CEPR

If you value CEPR's work, support us by making a financial contribution.

Si valora el trabajo de CEPR, apóyenos haciendo una contribución financiera.

Donate Apóyanos

Keep up with our latest news