Jobs report way below expectations as delta variant upends recovery

Employers added 235,000 jobs in August, far below expectations of 720,000 new hires, and the unemployment rate dipped slightly to 5.2%, the Department of Labor said Friday.

The fresh labor market data comes as the spread of the more contagious delta variant has throttled the pace of the recovery. The latest figure is a steep fall from the approximately 1 million jobs that were added in both June and July.

Despite the dismal top-line numbers, some labor economists see glimmers of hope in the continued job gains despite virus cases increasing sharply across the country.

"COVID cases surged more than fourfold between July and August and hospitals have reached capacity in parts of the country," Julia Pollak, the chief labor economist at ZipRecruiter, told ABC News. "The last time that happened there was a very, very enormous and precipitous labor market effect -- a very negative effect -- and this time around, despite such a huge surge, we've actually seen the job market continue to make progress."

Pollak also called the report "encouraging."

"The labor market, rather than really stalling or going into reverse, has actually continued to recover," she said. "The main COVID delta effects here are a slowdown in those face-to-face service industries, in retail and in restaurants particularly, but elsewhere, the labor market is looking strong."

So far this year, job growth has averaged 586,000 jobs per month, the DOL said. While employment has risen by some 17 million since April 2020, the economy is still down about 5.3 million jobs from its pre-pandemic level in February 2020 -- when the unemployment rate was at a historic low of 3.5% prior to COVID-19 walloping the labor market.

Notable job gains last month occurred in professional and business services (which saw an uptick of 74,000 jobs), transportation and warehousing (which saw a rise of 53,000 jobs), private education (which saw an increase of 40,000 jobs), and manufacturing (which added 37,000 jobs).

Employment in retail trade declined by 29,000 jobs in August, likely a reflection of the virus resurgence, with major losses in food and beverage stores (where 23,000 jobs were lost).

Leisure and hospitality employment was unchanged in August, the DOL said, after back-to-back gains the previous months. Employment in leisure and hospitality is still down by 1.7 million jobs compared to pre-pandemic levels.

The latest data continues to reflect the uneven impact of the COVID-19 downturn. The unemployment rate for white workers was 4.5% in August, compared to 8.8% for Black workers, 6.4% for Hispanic workers and 4.6% for Asian workers.

The number of long-term unemployed (those jobless for 27 weeks or more) fell in August to 3.2 million, but is 2.1 million higher than in February 2020. These long-term unemployed accounted for 37.4% of the total unemployed in August, according to the DOL.

Meanwhile, average hourly earnings for workers rose by 17 cents to $30.73 in August, adding to increases seen in the prior four months of the year.

"We've seen a lot of really big changes in wages recently, like the median wage for non-supervisory employees in leisure and hospitality was under $15 an hour before COVID. It's now $16.50," Pollak said.

Citing a survey from the Federal Reserve Bank of New York, Pollak said the reservation wage (or the lowest amount workers are prepared to accept to take a job) has gone up a whopping 26% for college-educated workers.

"There are all kinds of reasons for that -- a pandemic is not just a shock to labor demand but also to labor supply," she said, noting how millions of people exited the labor force amid the pandemic due to concerns about health and safety, child care, transportation and more.

Finally, Pollak said the latest report indicates remote work is here to stay. According to the federal government, 13.4% of employed persons teleworked because of the pandemic in August, little changed from the prior month.

"The number of people working remotely due to the pandemic ... held steady between July and August, so that I think is one of the biggest effects of delta here in this report," she said. "We're still seeing growth in these work-from-home industries and that just shows that one way we've managed to minimize the sort of economic cost of COVID is this huge shift to remote work, much of which will long outlive the pandemic."