As the month of September rolled in, many economic experts had expected a dramatic and major turnaround in the number of new jobs, a sign that the effects of Covid-19 were finally behind us. Most people had already considered the pandemic as being over and in many respects the signs clearly projected a favorable outlook. Despite some resistance, most Americans received vaccinations and the death rate mercifully dropped. Restrictions were being slowly lifted in many areas of society. The “return to normalcy” seemed to be well underway, that is until the Delta Variant of Covid-19 reared its ugly head.
One of the most promising developments was the slow but steady return to the workplace. Yet, there appeared to be considerable resistance to giving up working from home, a direct byproduct from the pandemic. Many workers were still collecting unemployment benefits as well as special government subsidies, which further encouraged them to continue working from home rather than return to the workplace. Manhattan was a good example as many office buildings reported that only 25% at most of the occupants had returned. The end of the special subsidies this month will be very telling in that it should nudge people back to work unless the work from home model is now endemic.
One economic measure that can tell the true story of the extent of the recovery is the number of new jobs created. There was the expectation that in August the number of new jobs added would be 720,000. Instead, the most recent report from the US Department of Labor was that only 235,000 new jobs were added, a third of what was anticipated. This, even though the unemployment rate fell to 5.2%, which was on target with estimates. Some economic experts say that many unemployed are no longer actively looking for jobs and that others are opting for early retirement.
“The labor market recovery hit the brakes this month with a dramatic showdown in all industries,” said Daniel Zhao, senior economist at jobs site Glassdoor. “Ultimately, the Delta variant wave is a harsh reminder that the pandemic is still in the driver’s seat, and it now controls our economic future.”
The leisure and hospitality jobs, which had been the primary driver of overall gains at 350,000 per month for the past six months, stalled in August as the unemployment rate in the industry ticked higher to 9.1%. What this tells us is that despite the return of some travel, the hospitality industry has still not fully recovered, especially since business travel remains stalled. In fact, hotels are reporting less than normal occupancy for the just concluded summer months, which basically reflects the slowdown of leisure travel.
The only sector that did show some signs of life was professional and business services which led with 74,000 new positions in August, but even that was a far cry from what is needed. The impact of the labor shortage will be felt in many areas of life. In general, the Delta Variant is setting back the timetable for “normalcy.” Some aspects of the restrictions are making a return. There is uncertainty what impact the return to the classroom will have on the spread of the Variant. The addition of a possible booster vaccine is still an uncertainty as a way of slowing the spread of the virus.
The uncertainty is extremely troubling for colleges and universities. Many colleges that had expected to return to the classroom are now postponing the event. Students and faculty in colleges all over the country are pushing for continued remote learning. Others are advocating having the choice between the classroom and remote learning. Some colleges have pushed back the opening of the Fall Semester until at least November.
The pushback has also occurred in professional firms. Many who had planned to fully open in September have now notified their work force of a postponement till at least November and in some cases until the end of the year.
Manufacturing has been severely impacted by the ongoing labor shortages, which has directly led to an unprecedented shortage of goods. In addition, part of the goods shortage is due to the delay of shipping all over the world. Port delays certainly slow deliveries of merchandise around the world, from the Suez Canal blockage to recent slowdowns at Chinese ports. Increased waiting times for ships to unload in Los Angeles/Long Beach and Oakland mean that those ships cannot return to Asia right away. In effect, the world has lost a good bit of its shipping capacity.
But even more damaging to the economy is the labor shortage, according to 90% of local chamber of commerce leaders surveyed by the U.S. Chamber of Commerce.
When workers don’t show up at a manufacturing plant, production is slowed, and orders cannot be filled. Manufacturers have a hard time filling jobs for warehouse workers and drivers, all contributing to the major shortage of goods in the US. Wal-Mart recently announced that it would raise salaries and is looking to hire 20,000 people. Amazon says it is looking to hire as many as 55,000 people, but the question will be whether there are takers for all those new jobs.
The labor shortage is very much in evidence in our community as store after store has a posted sign: “Now Hiring” or if it is a restaurant “Waiters and Kitchen Staff Wanted.” One caterer told me that he actually had to cancel a half dozen jobs because he did not have enough staff to service those accounts. This after he was forced to close for over a year due to the pandemic and survived only because of the Stimulus.
Society faces many challenges ahead. First and foremost, will be getting people back to work to fill all the jobs that are going begging. The hope is that the end of the special government incentives will force many to return. Second it will be to get a handle on the spread of the virus. Third will be getting the education system up and running.
All of these concerns directly affect the economy. Yes, we had expected to be mostly out of the woods by now, not only resuming social activities, sports and entertainment but getting our manufacturers to produce the goods we need. Getting the pandemic under control will help the nation’s hospitals return to routine care for patients, which in many cases have truly been neglected. For all practical purposes the fallout from the pandemic was nearly over until the Delta Variant made its appearance. Let us hope that we will shortly be able to dispense with the virus and the variant so that we can truly return to “normal.” Gmar Chasima Tova and Moadim Lesimcha!