July’s great jobs report comes with an enormous, delta-shaped asterisk
Signs posted at a restaurant in Los Angeles on May 28.
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The jobs report released Friday was excellent. But it comes with an enormous, delta-shaped asterisk.
The economy added 943,000 jobs on net in July, more than analysts had forecast. Even better, the prior two months’ hiring numbers were revised upward, too, meaning that the labor market was improving faster than initially thought. We’re still down about 5.7 million jobs on net since February 2020, but our historically deep jobs hole is finally filling in.
Other data points also give reason to cheer: The unemployment rate fell to 5.4 percent, down from 5.9 percent in June. The number of long-term unemployed (those jobless for at least six months) plummeted. The share of people actively in the labor force — working or looking for work — ticked up.
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These are numbers worth celebrating. Before you get too excited, though, remember that these jobs numbers are based on data collected in mid-July. (Employers are always asked how many people were on their books during the pay period that includes the 12th of the month.) In the weeks since, this unfortunately happened:
Covid-19 cases nationwide have spiked. On July 12, the seven-day average for new reported cases was 23,369; as of Aug. 5, this metric had quadrupled, to 99,669. The more-contagious delta variant has been spreading like wildfire, particularly in areas where vaccination rates are low.
And we don’t yet know how much damage it will inflict — medically or economically.
That is, in addition to the many unknowns about how many people will fall ill, be hospitalized and even die, we also don’t know how the spread of the variant might affect consumer and worker behavior. Some recent survey data suggest that Americans who had lately gotten more comfortable resuming their normal lives — traveling, dining out, seeing movies, returning to jobs — may retrench.
A Gallup poll from the second half of July found that the share of Americans who say they are “very confident” they can protect themselves against covid in public places fell to 38 percent, from 50 percent in June.
Gallup also found that a rising share of Americans say healthy people should stay home as much as possible to avoid spreading the virus, as opposed to living their lives and conducting their business as they normally would (41 percent in July, vs. 35 percent in June).
The same poll suggests that, at least when the survey was conducted, respondents were not yet acting on their own cautious advice; there was no meaningful change from June to July in the percentage of U.S. adults who said they were avoiding public places; small gatherings; large crowds; or travel by plane, bus or train. But virus conditions have worsened since the poll was taken.
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And Americans’ expectations for how long pandemic-related disruptions will continue have deteriorated.
In July, 83 percent of Americans said they think covid-related disruptions to travel, school, work and public events will persist through the end of 2021 or into 2022, up from 53 percent in June. Even if they still opt to take that long-awaited, long-ago-booked vacation today, such pessimism could affect willingness to plan travel, buy concert tickets, etc., in the months ahead. Renewed threats of school and child-care closures could also make it more difficult for parents to maintain or return to jobs.
So that’s the downer case. There are more optimistic economic scenarios, though, under which output growth and hiring might defy the rise in covid cases.
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One possibility is that covid fatigue has set in. That is, no matter how much higher cases and hospitalizations climb, no matter how many people tell pollsters that they know everyone should remain cautious, they’re personally tired of staying home and so continue to go out.
Another is that news about the delta variant drives vaccination rates higher, as people get scared straight by stories of unvaccinated young and healthy people (and Republicans and other populations that have been vaccine holdouts) falling seriously ill or dying. Already this seems to be happening, with Americans rushing out to get shots around the country but especially in states where cases are rising quickly. Hopefully these trends continue. They’ll help save lives and bolster the consumer psychology that drives economic behavior.
As has been the case since the beginning, the virus — and the vaccines and other measures that guard against it — are still very much in control of the economy. The key to more jobs is more jabs.
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