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President Joe Biden delivers remarks and signs an executive order on promoting competition in the American economy in the State Dining Room of the White House on July 9, 2021.
President Joe Biden delivers remarks and signs an executive order on promoting competition in the American economy in the State Dining Room of the White House on July 9, 2021. (Demetrius Freeman/The Washington Post)

WASHINGTON — The U.S. economy added just 235,000 jobs in August, a disappointing month of hiring as the delta variant caused coronavirus caseloads around the country to spike.

The dramatic slowdown in hiring could further intensify a debate in Washington about whether to continue pulling back federal assistance, particularly for lower income Americans. Jobless aid for more than seven million Americans is slated to end next week.

The August jobs report fell well below economists' forecasts and makes for a steep drop off from June, with 962,000 jobs added, and July, which was revised upward in the report to 1.1 million. The dropoff in hiring tracked closely with an acceleration of new cases and deaths caused by the coronavirus pandemic.

In mid-July, the U.S. averaged roughly 25,000 new coronavirus cases a day, according to Washington Post data. By late-August, the U.S. was averaging close to 160,000 new cases a day.

Overall, the country is still down more than 5 million jobs from before the pandemic. The unemployment rate edged down slightly to 5.2%.

"This has the effects of COVID written all over it," Nick Bunker, an economist at Indeed, said of the report. "That story jumps out. The good news is that while previous surges pushed employment down, this time it seems to have just slowed down the pace of progress, because the overall momentum seems pretty strong."

September was supposed to be a milestone in the country's triumphant reopening after vaccines were created and deployed in record speed.

As cases and government restrictions fell, consumers returned to old patterns, and schools and offices reopened en masse, economists and policy makers envisioned the economy beginning to round a corner, returning to something closer to the normal patterns of the pre-pandemic world. Congress even set mid-September as a cut-off point for the robust unemployment enhancements that many credit with helping workers pull through the darkest days of the pandemic.

But all of that has been thrown into jeopardy now, as the delta variant dents the economic recovery on multiple fronts. Consumer confidence plunged in August to the lowest level of the entire pandemic, according to the University of Michigan Survey of Consumers. People reported a sense of hopelessness that the health crisis was nowhere near over and September would not be the return to normal that so many had anticipated.

This gloom and ongoing fear of the virus is causing people to pull back on some spending. Restaurant reservations, hotel bookings and airline passengers all declined in August as people grew more cautious. Companies such as Amazon, Google, Apple, and Facebook pushed back their return to the office for white-collar workers, another blow to the range of businesses that support office work, including local restaurants.

In a telling sign, 5.6 million people said they were "unable to work" because their employer closed or lost business due to the pandemic, Labor Department data show. That was an increase of about 400,000 people compared to July, a clear sign of the delta variant's toll on the workforce in the last few weeks.

Restaurant reservations had nearly recovered to pre-pandemic levels in late June, OpenTable data show, but are now down about 10%, which is roughly where they were in the late spring.

In addition to the job losses in restaurants and retail in August, there's a concerning decline in childcare employment and a drop in women's participation in the labor force, especially among those aged 25 to 54. This suggests that, once again, the chaos surrounding childcare and school re-openings is forcing moms to stop working in order to care for children.

Employment in the childcare industry fell by nearly 6,000 workers in August and remains down by more than 126,000 workers. Childcare facilities around the country say they are unable to open all their classrooms because they do not have enough staff, especially for infant rooms that typically allow no more than three or four babies per worker. The lack of childcare has a ripple effect on the economy as it prevents parents from being able to go to work.

School reopenings are posing a new set of challenges which can also impact the economy. Some school districts have had instantly shutter after battling outbreaks.

And some corners of the job market have proved particularly tight for people who are out of work.

Stephanie Pannell, a 53-year-old single mother in Harrison, Ark., who has been out of work since early on in the pandemic, says her life has been rocked by multiple crises.

Caseloads have surged in the county she lives in, with only 29% of the population vaccinated. Her 14-year-old son is unable to go back to school on a doctor's orders, due to a respiratory condition he suffers from, until the situation significantly improves.

Pannell has been without any income since the state cutoff federal unemployment benefits at the end of June, amid a push by Republican governors to end benefits to purportedly stimulate the labor market.

She says she has applied to some 40 jobs since then, mostly production work in manufacturing facilities in the area, but has yet to receive a call back.

"I don't know what's going on," she said. "They're saying nobody wants to work. I've been trying to work but they're not hiring. Or they're hiring, but not me. I don't know if it's my age, or I'm a woman, or what."

She said she fell behind on rent over the summer, but has been catching up, after her landlord offered her about 40 hours of work a week to help her stay afloat. She gets paid about $20 an hour to help him do fixing up — cleaning, finishing floors, painting — on apartments and homes, about half of which he keeps in exchange for her rent, she said.

The coronavirus appears to be dragging on several parts of the economy again: employment in the leisure and hospitality sector, which added an average of 350,000 jobs a month for the last six months, was level in August, as restaurants and bars and other food service establishments shed 42,000 jobs, offsetting some gains made by arts, entertainment and recreation facilities. Retail lost 29,000 jobs.

"This is all about the Delta variant," said Robert Frick, corporate economist at Navy Federal Credit Union. "Delta waves just crushing leisure and hospitality hiring and also you see numbers down in retail hiring. People just don't want to be around other people now in risk catching Delta, it's so highly contagious."

Job growth for the August was driven by 74,000 jobs added in professional and business services, 40,000 in private education, and 37,000 in manufacturing.

In a bright spot, the transportation and warehousing sector added 53,000 jobs last month — bringing it above the levels it had before the pandemic, a sign of the strong growth at companies like Amazon during the pandemic.

"There is clearly momentum and progress, but covid is a headwind that has slowed down how quickly we're moving forward," Bunker said.

(Amazon founder Jeff Bezos owns The Washington Post.)

Average hourly wages for workers continued to rise, however: up about 17 cents an hour, to $30.73, for all employees.

President Joe Biden projected confidence about the report in comments to reporters on Friday morning.

"What we're seeing is an economic recovery that's durable and strong," he said, citing the relatively low unemployment rate and the total number of jobs created since he took office. "I know some wanted to see a larger number today. And so today what we've seen this year is the continued growth month after month in job creation."

The Washington Post's Andrew Van Dam contributed to this report.

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