The Labor Market Recovery Slowed in August

Today's data from the Bureau of Labor Statistics (BLS) show that the economy added 235,000 jobs in August, which is significantly lower than the amount of jobs that were added in each of the three prior months. That small number of job gains comes alongside a decrease in the unemployment rate — from 5.4 percent in July to 5.2 percent in August — which reflects low growth in the size of the labor force.

The industry sector with the largest number of gains was professional and business services. BLS notes that the gains in that sector were particularly strong for architectural and engineering services, computer systems design, and scientific research and development.

In addition to the modest number of job gains, August also showed a decline in the number of weekly unemployment claims. The number of workers filing for unemployment compensation dropped from its peak of 6 million last April to 340,000 in the week that ended on August 28.

Ongoing Concerns

Despite the decline in the unemployment rate, the rate of unemployment remains higher than before the coronavirus (COVID-19) pandemic for all races. In August, Black, Hispanic, and Asian workers all exhibited rates of unemployment at least 2 percentage points above the levels that were recorded in February 2020. By contrast, the unemployment rate for white workers was just 1.5 percentage points higher than it was before the onset of the pandemic.

What’s more, standard unemployment rates do not capture all of the negative effects that the coronavirus pandemic is having on the labor market. For example, the overall unemployment rate would be 6.1 percent if it included people who had stopped looking for work during the past four weeks — the headline unemployment rate does not count those people as unemployed because they are considered outside of the labor force. Including the 4.5 million people that are working part time despite desiring full-time work would bring the rate to 8.8 percent. In other words, about one in 11 American workers are currently affected by the ongoing downturn in the labor market.

A strong recovery in the labor market could have meaningful implications for the federal budget and the economy overall. For example, income and payroll tax receipts would be higher if more people were working. However, certain groups of workers are still struggling to find jobs and employers are having trouble filling positions, resulting in part from a mismatch between available jobs, skills, and location. Those factors indicate that much remains to be done.

Related: Here’s Everything Congress Has Done to Respond to the Coronavirus So Far

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