The US jobs recovery is about to get a reality check.
It was a strong summer, with nearly 2.5 million jobs added back between May and July even as the Delta variant started to increase Covid-19 infections — but economists are now growing cautious that August may not have been as strong. Economists polled by Refinitiv still predict 728,000 jobs were added last month. But that forecast was revised down from 750,000 early Wednesday after a disappointing reading from ADP Employment Reports, which looks at private sector payrolls. It was the second time in a row that the ADP report was significantly below expectations: 374,000 jobs were added in August, compared with 613,000 predicted, according to Refinitiv.
The two measures of the labor market aren’t correlated — but the ADP report, which comes out first, is seen as a barometer for the jobs data later in the week. “Our latest report suggests that the labor market recovery has downshifted,” Nela Richardson, chief economist at ADP, told CNN Business on a call with reporters. Increased spread of the virus might again keep people from returning to work. “The final estimate of job gains for August will likely fall short.” That doesn’t bode well for Friday.
But things have been a bit confusing. Last month’s downbeat ADP report was followed by a strong government jobs report, for example. The forecasts also vary widely. Moody’s Analytics predicts 500,000 jobs were added in August, while UBS expects 1 million, according to Refintiv. It serves as a reminder that making predictions during the evolving and recovering pandemic economy is still very hard. Four key trends are driving the labor market right now, Richardson said: Covid spread via the Delta variant, waning consumer confidence, high demand for labor creating a worker shortage and an uneven K-shaped recovery. “The uncertainty of the Delta variant has exacerbated the unevenness of the recovery,” she said.