This Month in Labor: The Delta Variant

Welcome to This Month in Labor, nGROUP’s ongoing series that keeps track of the latest news and trends in the US labor market. For October 2021, we’re keeping our eyes on the still-volatile employment numbers, taking a closer look at why labor remains so scarce, and imagining the supply chain workforce of the future.

First up, what happened in the latest round of official government employment numbers?

#1 – Employment numbers weak, but some bright spots

When the September jobs report landed, the reaction from all corners was almost entirely unenthusiastic. American employers added just 194,000 jobs, far below expectations of close to 500,000 new jobs. Even though the announced number represents another noticeable dip in the overall unemployment rate (down to 4.8%), economists and business leaders were still left deflated by the weak report.

The Delta variant is receiving much of the blame for the poor number. After searing-hot job growth during the summer, it seems many employers hit the hiring brakes as Delta caused cases to surge again. As this article by The New York Times illustrates, however, the news may not be all bad.

For example, the September jobs data was recorded in the middle of the month, pretty much at the peak of the Delta spike. Since then, other hiring and economic indicators seem to point to an accelerating (or re-accelerating) recovery. One expert even went so far as to say the September report was essentially nothing more than a “glance in the rearview mirror.”

Still, this piece, also from The New York Times, showed that the September report contained at least one more worrying figure: 183,000. That was the number of people who exited the workforce because they were too discouraged in their efforts to find a job. It was the first time since May that the number of people working or actively seeking work had declined.

Overall, the US economy has still suffered a net loss of approximately 5,000,000 jobs since the pandemic began.

#2 – What’s causing the labor shortage, really?

Why is demand for labor so much greater than supply? Why are millions of job openings left unfilled when there appear to be millions of available workers? What has the pandemic done to permanently change the US labor market?

First of all, not all employment ills can be blamed on Covid, as this article from US News & World Report makes clear. Many factors are at play in the current “seismic shift” that is reshaping the employment landscape. The article identifies four major pressures at the heart of this shift:

Accelerating retirement of Baby Boomers
Continuing adaptation to rapid tech changes
Changing demographics
Evolving attitudes about the meaning of work

Some of the more eye-catching numbers from this article include many statistics captured by national and global surveys from various organizations. For example:

51% of small business owners reported job openings they cannot fill, up 1% from August’s then-record high
54% of job applicants have turned down an offer because of a lack of flexibility
76% of employees desire flexibility in where they work (office vs home), and 93% expect a say in when they work
10.9 million jobs remain open, while 8.7 million unemployed job seekers remain out of work

#3 – Are increasing vaccination numbers the key to recover? Fed leaders say yes.

After the September jobs report was released, it was clear that the Fed greatly underestimated the toll of the delta variant on the economy. This will be the last jobs report that the Fed sees prior to their policy meeting in November, when they are expected to taper the support of the markets.

Fed officials continue to insist that inflation is temporary, and that once supply chain bottlenecks have time to clear, it will level out. But others claim the delta variant has further muddied global supply chains – which are inextricably tied to inflation – for a long time.

“It is frustrating to acknowledge that getting people vaccinated and getting delta under control still remains the most important economic policy that we have, and it’s frustrating to see the bottlenecks and supply chain problems … apparently getting a little bit worse,” Federal Reserve Chair Jerome H. Powell said. He noted that while the overall forecast was still positive, parts of the recovery remain “highly uncertain.”

“I think there’s a common thread to the mistake in the Fed’s forecast, which is how the pandemic is going to impact the economy even after we got through the worst of it in 2020,” said Skanda Amarnath of Employ America.

Powell and other Fed leaders have long said vaccinations are the most direct way to sustain the economic recovery. But if anything, delta is a cautionary tale of how hazy the horizon remains.