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MI Responds: August 2021 Jobs Report

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MI Responds: August 2021 Jobs Report

September 3, 2021


After a strong rebound in job growth in the last two months, the economic recovery has slowed sharply, as evidenced by today’s jobs report. This morning the Bureau of Labor Statistics reported that the United States economy added just 235,000 jobs in August, a dramatic slowing from the revised 1.1 million gain in July. The unemployment rate also edged down to 5.2%, after a big drop in July. Together these suggest a slowing of job growth, back toward the tepid pace of recovery in the spring.

This slowing of growth points toward continued supply-side restrictions that have hampered the economic recovery so far, as job openings have outpaced employment growth. There was a lessening of some of these supply-side factors over the summer, with a receding of virus activity fueled by vaccinations. But the sharp rise in COVID case counts and hospitalizations with the Delta variant has brought health concerns back to the forefront, and seen the re-imposition of public health restrictions which have hampered economic activity. 

Further, after employment growth slowed in spring, half of the states ended their participation in the enhanced federal unemployment benefits programs which were paying many workers more than they earned on the job. Unemployment fell and the pace of hiring picked up as these states ended benefits, but the gains have been modest. The ending of enhanced benefits in the remaining states next week should provide an additional modest boost to hiring going forward. In addition, the return to in-person schooling has alleviated some of the increased childcare duties keeping some parents out of the labor market. 

But the lessening of the supply side restrictions from childcare and unemployment benefits are fighting against strong headwinds. Foremost remains the pandemic: the course of the virus is governing the course of the recovery. But on top of the renewed virus activity in recent weeks, the pandemic has prompted labor supply reductions which may prove permanent, with a wave of retirements and changing attitudes toward work. While the U.S. economy continues to see recovery, a full return to pre-pandemic labor market conditions in the near future is looking unlikely.


Noah Williams is an adjunct fellow at the Manhattan Institute and the Juli Plant Grainger Professor of Economics and director of the Center for Research on the Wisconsin Economy at the University of Wisconsin–Madison.

Photo by Prostock-Studio/iStock