U.S. employment growth likely pulled back in August after gaining nearly 2 million jobs in the past two months as soaring COVID-19 cases reduced demand for travel and entertainment, but the pace was probably enough to sustain the economic expansion.
The Labor Department's closely watched employment report on Friday would come as economists have been sharply marking down their gross domestic product estimates for the third quarter. Reasons cited include the resurgence in infections, driven by the Delta variant of the coronavirus, and relentless shortages of raw materials, which are depressing automobile sales and restocking.
According to a Reuters survey of economists nonfarm payrolls likely increased by 750,000 jobs last month. The economy created 1.881 million jobs in June and July. Should job growth in August meet expectations, that would leave the level of employment about 5 million jobs below its peak in February 2020.
"COVID effects may make this comparison to the trend less useful, however, August payrolls have been revised higher with the subsequent two jobs reports in 11 of the last 12 years, including last year," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. Jim O'Sullivan, chief U.S. Macro Strategist at TD Securities in New York, who is forecasting a 400,000 rise in payrolls in August, does not believe this would be weak enough for the Fed to back away from their "this year" signal.
Manufacturing payrolls are expected to have advanced by 25,000 jobs last month. Factory hiring is being constrained by input shortages, especially semiconductors, which have depressed motor vehicle production and sales.Motor vehicle sales tumbled 10.7% in August, prompting economists at Goldman Sachs and JPMorgan to slash third-quarter GDP growth estimates to as low as a 3.5% annualized rate from as high as 8.25%.
There is cautious optimism the labor pool will increase because of schools reopening and government-funded benefits expiring on Monday. But the Delta variant likely delayed the return to the labor force for some.
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