Job growth slowed further last month, the latest sign that the economy’s spring momentum has faded — and a warning that the recovery could go into reverse this fall without further government support.
U.S. employers added 1.4 million jobs in August, the Labor Department said Friday, down from the gains in the three previous months. The slowdown would have been more pronounced without the hiring of nearly a quarter-million temporary census workers.
The report held some good news: The unemployment rate fell by more than expected, to 8.4 percent. In April — when joblessness was the highest since the Great Depression — forecasters at the Congressional Budget Office said unemployment would remain in the double digits well into next year.
But an increasing number of people reported in the Labor Department’s August survey that they had lost their jobs permanently, rather than being temporarily laid off or furloughed — a sign that the crisis is doing lasting damage.
“There’s a fragility in the numbers,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “There are cracks in the underlying foundation.”
Jobs remain far below pre-pandemic levels
Cumulative change in all jobs since August 2016
Those cracks are appearing as trillions of dollars in federal spending, which helped sustain many households and businesses early in the pandemic, are drying up.
A $600 weekly federal supplement to unemployment benefits expired in July; a $300-a-week replacement, announced by President Trump last month, has been slow to kick in and will last for only a few weeks. The government’s marquee business relief effort, the Paycheck Protection Program, ended in August.
The August jobs data was collected early in the month, and might not reflect the full impact of the loss of benefits, economists warn. That calendar quirk could have political ramifications, easing pressure on Congress to agree on a new round of emergency spending.
“If the labor market data continue to hold, if we don’t see a big destruction to consumer spending on the back of the loss of the unemployment benefits, that reduces the sense of urgency that something needs to be done prior to the election,” said Michelle Meyer, head of U.S. economics for Bank of America.
Economists warn that would set the stage for a big drop in spending in the fall, leading to more job losses and a wave of small-business failures. Corporations including American Airlines have announced they are laying off more workers or, as in the case of the department store stalwart Lord & Taylor, going out of business.
Applications for unemployment benefits rose last week, and data from Homebase — which provides time-management software to small businesses — shows that the number of people working has declined since early August. Economists say those figures suggest that job growth could turn flat or negative in the fall.
“Federal spending was meant to be a bridge,” said Beth Ann Bovino, chief U.S. economist for S&P Global. “Well, it looks like the ravine has widened and the bridge is halfway built, so there are a lot of people stranded.”
All told, less than half of the 22 million jobs lost early in the pandemic have been recovered. But the unemployment rate has fallen much faster than most forecasters expected, from 10.2 percent in July and 14.7 percent in April. And the labor force grew in August, an indication that jobless workers are not yet giving up their searches as many did during the last recession a decade ago. Some sectors that were dealt a blow by the pandemic, such as the retail industry, continued to post strong job gains.
Mr. Trump cheered the report on Twitter. “Great Jobs Numbers,” he declared, highlighting the unemployment rate’s decline into single digits as “faster and deeper than thought possible.”
His Democratic opponent, former Vice President Joseph R. Biden Jr., said in Wilmington, Del., that “any job added back is positive.” But he said that when working people are asked “how do they feel about the economy coming back,” he said, “you’ll find they don’t feel it.”
Economists said the slowdown was a worrying sign that the low-hanging fruit of the recovery — the rehiring of millions of furloughed restaurant, hotel and entertainment workers — could be largely gone.
Just 174,000 jobs were added last month in leisure and hospitality, a disappointing gain for an industry that lost more than eight million to the pandemic and has recovered only half. And as companies reopen, many are discovering that with demand still weak, they don’t need or can’t afford as many workers as before the pandemic.
Marcus Hotels, which operates more than a dozen hotels, mostly in the Midwest, began reopening its properties in June and has brought back about 60 percent of the nearly 4,000 employees it had before the pandemic. But in recent weeks, it has begun permanently laying off many of the employees who remained on furlough.
“We held out as long as we could, waiting to see what was going to happen,” said Michael Evans, the president of Marcus, who added that it had paid benefits for employees as long as they were furloughed.
Mr. Evans said that he thought the hotel business would bounce back eventually, but that it could take years to return to its previous level. And even when it does, he said, Marcus will probably not need as many workers.
“As we’ve planned for the reopenings, we re-evaluated our entire business model,” he said. “If business were back to normal right now, we would still operate more efficiently.”
Some industries are approaching pre-pandemic employment, but leisure and hospitality jobs are lagging far behind
Cumulative change in jobs since August 2016, by industry
Decisions like the ones at Marcus mean that workers like Kara Hanley could have a hard time getting back to work.
Ms. Hanley, 23, was furloughed in March from her job as a room-service supervisor at a Marriott hotel in Orlando, Fla. At first, she expected the furlough to last a few weeks. Then, as weeks passed and she didn’t get a call, she thought she might be waiting until late summer, or perhaps Christmas.
When the phone rang on Sept. 1, she assumed that Marriott was calling to tell her it was finally time to return to work. Instead, she learned she was being laid off, effective Sept. 18.
“I really didn’t think that I was going to get let go,” she said. “I just kept thinking, when they need me, they’re going to call me back.”
The emergency spending programs that Congress passed last spring were meant to help prevent that kind of lasting economic harm. Forgivable loans to small businesses were intended to help avert bankruptcies and layoffs. Enhanced unemployment benefits were intended not just to prevent hunger and homelessness among the jobless, but also to minimize the cascade of economic damage that would follow.
Those programs, despite a rocky start, were largely successful. A wave of foreclosures has yet to occur. Consumer spending rebounded strongly in May and June, and companies began recalling furloughed workers. But without a new round of aid, much of that progress could be lost, with lasting economic consequences.
“I am more concerned about where the economy is now than I was in April,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative. “In April, it was fixable. We’re just letting the scars build up now.”
H. Brandon Williams was supposed to spend this month celebrating the third anniversary of FishScale, his restaurant in Washington, D.C. Instead, he is trying to keep his business afloat.
The restaurant, which specializes in burgers made from sustainably caught wild fish, survived the initial blow from the pandemic, which wiped out many other Black-owned small businesses.
But the business isn’t out of the woods. Nearby Howard University recently announced that it would shift its undergraduate classes online for the fall semester and close its dormitories. FishScale also relied on revenue from sales at a seasonal farmers’ market, which didn’t open this year.
Now, with the federal unemployment supplement and other aid programs gone, Mr. Williams, 39, notices customers pinching their pennies — which is forcing him to do the same. He has cut back to three employees from six and has won rent concessions from his landlord that he said should get him through the end of the year. He isn’t sure what will happen after that.
“We’re still at that area where we could go either way,” Mr. Williams said.
Julia Pollak, a labor economist for the employment site ZipRecruiter, said many businesses were facing similar decisions heading into the winter season, which is a challenge for many small businesses in the best of times.
“There are many companies that after a summer of gathering way too few acorns are going into a hibernation that may not sustain them,” she said.
Widespread business failures, Ms. Pollak said, “could have a cascading effect on those local economies.” That is especially true of Black neighborhoods that often struggle to draw investment from large corporations.
Mr. Williams said he wanted to stay in business not only for himself but also for his community. “There are a lot of people who couldn’t get a job if it weren’t for Black-owned businesses,” he said. “I want young boys and girls to look and see somebody doing something that’s out of the box.”
Gillian Friedman contributed reporting.