September hiring trends leave businesses asking: Where are the workers?

·4 min read

Job growth was disappointing in September.

Although the U.S. economy is growing, there still are pockets of weakness in the labor market as labor shortages intensified last month, according to Friday's monthly jobs report from the Labor Department.

Hiring slowed again in September as a surge in COVID 19 cases spurred by the delta variant offset the reopening of most schools and expiration of unemployment benefits, developments that were expected to coax some Americans back to work.

Employers added just 194,000 jobs last month, which was far below economists' expectations for a gain of 488,000.

Still, economists say the latest employment report reflects a labor market “in flux.” Job growth should strengthen in coming months as the latest wave of COVID cases decline, more Americans get vaccinated and workers resume their job search after enhanced unemployment benefits were cut off last month.

Here’s are the latest takeaways on hiring:

A man walks out of a Marc's Store, Friday, Jan. 8, 2021, in Mayfield Heights, Ohio.
A man walks out of a Marc's Store, Friday, Jan. 8, 2021, in Mayfield Heights, Ohio.

Americans drop out of labor force

In September, unemployment fell to 4.8%, the lowest it has been since February 2020, when it was 3.5%. That was just before the pandemic battered the global economy.

But many workers still are hesitant to return to work as fears of contracting COVID-19 and constraints on parents who care for their kids were held back from rejoining the workforce due to school closures. Those factors have in part contributed to worker shortages that have crimped employment gains.

But the share of Americans working or looking for jobs unexpectedly fell to 61.6% from 61.7%, according to the Labor Department.

That is down from a pre-recession level of above 63%.

That means there are about 3 million fewer people in the labor force this fall than there were before the pandemic, according to PNC Financial Services Group.

“Labor force participation is being held back by surging retirement, ongoing virus complications, which affect willingness to work and availability by way of childcare needs, and also by many people who are reassessing their desire to work,” Luke Tilley, chief economist at Wilmington Trust, said in a research note.

Where are the workers?

Payroll gains were still solid in other sectors.

Construction added 22,000 jobs after employment was unchanged in August. The rise in job creation in that sector reflects strong demand particularly in housing, where there simply aren’t enough homes available to meet buyer demand, economists say.

Although demand for workers is high and total employment in the sectors remain below their pre-pandemic peak, employers continue to struggle to fill job openings, economists say.

Professional and business services added 60,000; retail, 56,000; and transportation and warehousing, 47,000. Manufacturing added 26,000 jobs despite lingering supply-chain problems.

What held back hiring in September?

Employment in public and private education fell by 180,000 after seasonal adjustments because hiring wasn’t as strong as it has been historically. Some schools are still conducting a hybrid of remote and in-person learning amid the COVID surges.

Another issue is the difficulty employers face in hiring for certain school system positions such as bus drivers, food service workers, building maintenance workers, or substitute teachers, according to the Economic Policy Institute. These lower wage and part-time positions employ an often older workforce that may be more concerned about infection than others.

Leisure and hospitality, the industry hit hardest by the pandemic, added a relatively modest 74,000 jobs as restaurants and bars added 29,000.

Still, employment in leisure and hospitality services is down by 1.6 million, or more than 9%, from its pre-recession level, according to Gus Faucher, chief economist of PNC Financial Services Group.

Jobless benefits end, but it didn't help

Friday’s employment report was the first since the pandemic-era federal unemployment programs were stoppedon Sept. 6. The benefits, which had included an extra $300 weekly bonus, were believed to be holding back the recovery by some policymakers in Washington and many Republican governors who in some states ended the enhanced federal benefit this summer.

But the labor force shrank last month by 183,000 from August.

That was contrary to expectations that job growth would expand following the expiration of the enhanced unemployment benefits.

To be sure, the payroll survey was conducted in mid-September, giving people little time to find a job before the benefits ended earlier that month.

Hiring expected to pick up steam

So far, the U.S. has recovered 17.4 million, or 78%, of the 22.4 million jobs lost during the depths of the pandemic in the spring of 2020.

That leaves the nation 5 million jobs below its pre-crisis level.

At the current three-month moving average of job growth, employment would be back to its pre-recession level in June 2022, according to PNC Financial Services Group.

Although job growth has slowed from a rapid pace earlier in the summer following an increase in COVID-19 cases and difficulties in hiring, economists expect job growth to pick back up in the coming months as more Americans get vaccinated and workers continue their job search.

“If COVID cases continue falling, as they recently have, the outlook for the job market will be one of continued improvements,” Jason Schenker, president of Prestige Economics, said in a research note.

This article originally appeared on USA TODAY: The Great Resignation shows impact in September jobs report

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