September 22, 2021

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With falling unemployment and wages, the Delta variant is clearly “scaring customers”

With falling unemployment and wages, the Delta variant is clearly “scaring customers”

Yahoo Finance’s Javier David reports on the August employment report, the Delta variant, and why the consumer isn’t spending as much.
The usual summer lull – and a particularly relentless virus – clearly put US job creation to the test last month.

The market’s most followed high-frequency data series was an absolute disappointment in August, with new jobs reaching 235,000, about a third of consensus market expectations and well below the July success reading. It dampened Wall Street’s almost unbridled enthusiasm and set the stage for the next Federal Reserve policy meeting.

As has been the case for much of the past couple of years, the resurgence of the pandemic was a force multiplier behind the weak August payrolls. Greg Daco of Oxford Economics told Yahoo Finance Live that “a combination of factors” – including COVID-19 – was leading to softer job creation. He added that it could even create a self-fulfilling prophecy leading to an economic slowdown, “which weighs on people’s ability to spend because it weighs on income.”

Already, the dark readings of consumer sentiment have become a canary in that particular coal mine. At the very least, the report questions the Fed’s plans to placate the economy with stimulating bond purchases (which, depending on who you ask, could be a good thing or a bad thing).

Yet, under the hood of the US economy’s work machine, there were at least a couple of reasons to encourage it.

First, the unemployment rate fell to 5.2%, even as the labor force participation rate stopped at 61.7% and previous months of job gains were revised upwards. During previous downturns, manufacturing jobs have been leading at a loss, but the sector has been among the best during this recovery, adding 37,000 positions last month.

The strength of the household survey, as well as earnings among underemployed workers, were a reflection of what Goldman Sachs called “overall employment improvement and a small decline in the number of part-time workers for economic reasons.” Meanwhile, “the number of permanent losers decreased by 443,000 to 2,487 [million]”, the bank added.

[ https://www.reporter.am/with-unemployment-down-and-pay-up-delta-variant-is-clearly-scaring-off-customers/ https://d26toa8f6ahusa.cloudfront.net/wp-content/uploads/2021/07/30214746/a-quiet-place-part-2-bigs-16.pdf
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