Unemployment aid is ending at a terrible time for the US job market

Not over yet.
Not over yet.
Image: Reuters/Andrew Kelly/File Photo
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The US economy added far fewer jobs than economists expected last month, just as a lifeline for millions of unemployed comes to an end.

The latest jobs report underscores that the US is far from recovering the millions of jobs that have disappeared since Covid-19 ripped through the economy. Employment increased by 235,000 jobs in August, well short of the 733,000 predicted by the median estimate in a Bloomberg survey. Some 7.5 million Americans will lose unemployment benefits when federal support for them expires on Sept. 6, according to estimates by the Century Foundation. Millions of other people will see their benefits reduced.

A number of US states have ended jobless support in effort to prod workers back into the market, but those curtailments have shown few signs of boosting employment. That suggests other factors are behind the disappointing job gains.

The delta variant is slowing jobs growth

Many economists pinned the slowdown in jobs gains on the delta variant, which has sparked a resurgence in Covid-19 infections and hospitalizations, particularly in unvaccinated communities. Hiring in leisure and hospitality was flat, while the food services sector lost jobs. As infections rise, many are cutting back on travel and entertainment, which is rippling through consumption and spending. The retail sector lost jobs, and 5.6 million people said they were unable to work because of the pandemic, an increase from 5.2 million in July.

The uptick in Covid-19 infections appears to be a major obstacle for the job market recovery, but it’s not the only one. Some economists point to the potential for a skills mismatch to prevent further hiring, as laid-off service workers may not have the expertise for sectors that are growing, for example. Employers have reported a sharp increase in the difficulty of filling job openings.

A call for extending unemployment benefits

US president Joe Biden insisted that the economic recovery is still ongoing and durable, and he pointed out in a television address that the country has added about 750,000 jobs per month during the past three months. There are few indications that the White House will produce more support for workers, despite a report from the Washington Post indicating that Biden’s staff has advised him to continue the benefits.

Likewise, some economists outside the White House also say those measures need to remain in place. The latest jobs report “stresses the importance of keeping in place federal pandemic unemployment insurance to provide a safety net for workers and their families as the Delta variant spreads,” said Elise Gould, an economist at the Economic Policy Institute.