Daily Business Briefing
Sept. 3, 2021, 10:51 a.m. ET
Sept. 3, 2021, 10:51 a.m. ET
The American economy slowed abruptly last month, adding 235,000 jobs, a sharp drop from the huge gains recorded earlier in the summer and an indication that the Delta variant of the coronavirus is putting a damper on hiring.
The Labor Department report on Friday follows a sharp increase in coronavirus cases and deaths that has undermined hopes that restrictions on daily activities were nearing an end.
The unemployment rate was 5.2 percent, compared with 5.4 percent in July. Economists polled by Bloomberg has been looking for gain of 725,000 jobs.
The August showing would have been respectable in prepandemic times. But after gains of 962,000 in June and 1.05 million in July — and with more than eight million people unemployed — it was a sharp deceleration.
“Delta is a game-changer,†said Diane Swonk, chief economist at Grant Thornton, an accounting firm in Chicago. “It’s not that people are laying off workers in reaction to Delta but people are pulling back on travel and tourism and going out to eat and that has consequences.â€
She noted that the slowdown in hiring came as the impact of the huge fiscal stimulus earlier in the year was waning. And federally funded unemployment benefits will end after this week, affecting 7.5 million people.
“It’s a hard time to be losing momentum,†Ms. Swonk said.
The scale of the weakness was most apparent in lower-paid industries in which employees deal with customers face to face, like restaurants, bars and hotels. Leisure and hospitality employment in August was unchanged after strong gains in previous months. Retail jobs declined by 29,000. White-collar workers fared better, as did those in manufacturing.
Restaurant reservations on OpenTable were close to normal levels earlier in the summer, but are now 10 percent below where they were before the pandemic. There has also been a sharp decline in hours worked at restaurants and entertainment venues, according to data from Homebase, which provides time-management software to small businesses.
“I think the fingerprints of the Delta variant were all over this report,†said Scott Anderson, chief economist at Bank of the West in San Francisco. “We saw a big pullback in pandemic-impacted industries, and it was a pretty broad-based disappointment.â€
The report also showed the first increase since December in the number of people working from home.
Moreover, the Labor Department data was collected in the second week of August, so it may not reflect the full extent of the Delta spread or the impact of Hurricanes Henri and Ida in the second half of the month.
Although many experts expect economic growth to dip in the current quarter from the annualized rate of 6.5 percent in the spring, the economy is expected to remain in expansion mode for the rest of the year.
Gross domestic product has regained the ground lost in the pandemic. The housing market is robust, and Wall Street has been notching records as corporate results remain strong.
Manufacturing has been more muted, held back by supply chain disruptions and shortages of critical parts like semiconductors for automakers.
For Americans who are out of work, robust hiring is essential if unemployment is to get back to the 3.5 percent rate that prevailed before the pandemic.
Despite trillions in stimulus spending and hopes for a resumption of normal business activity amid vaccination efforts, the latest data show just how fragile the economy remains, experts said.
“We got another reminder of how significant the pandemic is in determining progress in our economy,†said Carl Tannenbaum, chief economist at Northern Trust. “It’s a clear indication of what the outbreak has done.â€
Ben Casselman contributed reporting.
Federal Reserve officials who have been looking for continued improvement in the labor market received a discouraging piece of news on Friday, when the Labor Department reported that employers added 235,000 jobs in August — far fewer than projected and a sign that the Delta variant may be weighing on hiring.
The Fed has been buying $120 billion in government-backed bonds each month to keep longer-term interest rates low and many types of borrowing cheap, bolstering lending and spending to help the economy heal. Officials are debating when and how to pare back those bond purchases, and investors are looking for an announcement about the planned start of the so-called taper at one of the Fed’s coming meetings.
But central bankers have tied their policy path closely to the labor market, suggesting that the economy has not yet quite achieved the “substantial further progress†they had hoped to see on the jobs front. Officials including Jerome H. Powell, the Fed chair, have signaled that although the economy has made adequate strides toward the central bank’s inflation goal to justify a slowdown in bond buying, they would like to see continued job gains before they feel confident in removing support.
Mr. Powell said during a speech last week that as of the Fed’s July meeting, he and most of his colleagues thought the Fed could start reducing the pace of asset purchases this year if the economy performed as they expected.
“The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant,†Mr. Powell added, saying that the Fed would be “carefully assessing incoming data and the evolving risks.â€
The August jobs report showed a sharp pullback in hotel and restaurant hiring, which tends to be particularly sensitive to virus outbreaks. At the same time, wages for those workers continued to rise, as did pay for workers overall, suggesting that employers are still paying up to lure people into work.
“I’m not sure that I want to read a lot into today’s softness, in terms of what it means for the Fed,†said Omair Sharif, founder and president of Inflation Insights. He said he expects the Fed to announce a taper in November, leaving time for it to see further improvement.
But other economists were less certain that the Fed’s stimulus pullback would happen that soon.
“Officials will probably be more inclined to wait for more data before deciding on when a tapering announcement and an actual scaling back of asset purchases may be appropriate,†Rubeela Farooqi, chief U.S. economist at High Frequency economics wrote in a note following the release.
And the fact that wages continued to move up could make the report a hard one for policymakers to interpret. The fresh data put the Fed “in an uncomfortable position — with the slowdown in the real economy and employment growth accompanied by signs of even more upward pressure on wages and prices,†Paul Ashworth, chief U.S. economist at Capital Economics wrote.
Even after it begins to slow its bond purchases, the Fed has other tools to support the economy and ensure that the labor market returns to a situation in which everyone who wants a job can get one. The central bank’s main policy interest rate, which guides short-term borrowing costs and affects consumer rates from mortgages to car loans, is at rock bottom and is likely to stay there for months or even years.
But slowing bond purchases will be the first step toward a more normal policy setting, and a sign that the Fed thinks the economy has come through the turbulent pandemic lockdown period and is making strong progress toward a full recovery.
The central bank is tiptoing gingerly when it comes to removing policy support compared to after past recessions: The unemployment rate dropped to 5.2 percent in the August report, and is likely to be substantially lower by the time the Fed increases rates. After the 2008 recession, the Fed had finished tapering and raised rates in late 2015, when joblessness was around 5 percent.
The slower reaction this time comes in part because economic conditions have been evolving so quickly. But more than that, many policymakers have come to see the Fed’s decision to start raising interest rates in 2015 — before the labor market was operating at full speed or inflation had stabilized — as a mistake. The Fed formally reworked its policy approach last year, laying out a more patient game plan and qualifying its employment target as a “broad-based and inclusive goal.â€
The ranks of the long-term unemployed shrank last month. But millions of Americans are still struggling to return to work as the federal government prepares to cut off the aid that has kept many of them afloat.
About 3.2 million workers in August had been unemployed for more than six months, economists’ standard definition for long-term unemployment. That was down from 3.4 million in July, and from a peak of 4.2 million in March. But it is still triple the level before the pandemic.
The official figures almost certainly understate the actual total because they exclude people who aren’t actively looking for work. That has been a particularly significant issue during the pandemic because child care issues, health concerns and other factors have kept many people from the work force.
Economic research has shown that once workers have been unemployed for more than six months, they have a harder time finding jobs. That has consequences not just for the workers themselves but for the economy as a whole, making it harder for overall employment to return to precrisis levels.
Expanded unemployment benefits, which the federal government has offered during the pandemic, have helped many workers pay bills while looking for work. But those programs end after this week, which will leave an estimated 7.5 million workers without benefits and will reduce payments for millions more.
The expanded benefits have already ended in about half of the states, which opted out of the programs early. The governors in those states, nearly all Republicans, argued that the benefits were discouraging people from returning to work, although there is little evidence so far that ending the programs has led to a pickup in hiring.
The looming deadline may have pushed some people to take jobs, however.
Wayne Pick, 52, took a job as a United States Postal Service carrier in late August after more than a year out of work. He will make more than $10,000 a year less as a carrier than he did in his old job as an assistant property manager in Chicago. But with unemployment benefits expiring this month, if he didn’t take the carrier job, he wouldn’t be able to pay his mortgage, he said.
“I took it in desperation,†he said. “I held out for the longest time. The unemployment benefits were very generous.â€
Things were looking up in May, he said, when infection rates were down and more people were vaccinated. Mr. Pick noticed that he was doing more interviews, with many being in person. But once the Delta variant started spreading across the country, he said he started getting fewer calls. He is continuing to apply for jobs in the hope of finding something that pays better.
“I don’t really hold out a lot of hope,†Mr. Pick said. “Things in the city really aren’t doing that well.â€
Stocks on Wall Street dipped in early trading after the government reported that employers added just 235,000 jobs in August, far below economists expectations for a gain of 725,000 positions.
The S&P 500 and the Nasdaq composite declined 0.2 percent in early trading.
Other data from the Labor Department was more upbeat: The unemployment rate fell, as economists had predicted, to 5.2 percent from 5.4 percent, and wage growth was faster than expected. Markets could struggle to interpret such a mixed report. The slowdown in hiring could give the Federal Reserve more room to decide when to roll back monetary stimulus, but economists are closely watching wages for signs of sustained higher inflation that the central bank wants to avoid.
“The Fed has to be careful in how they guide the markets around the timing of taper,†said Michelle Meyer, the chief U.S. economist at Bank of America, referring to a slowdown in the pace of the central bank’s bond-buying program. “It will be a function of the data flow and, specifically, how the economy reacts to the movement of Delta.â€
After the report, bond yields dropped before almost immediately rebounding. The 10-year yield on U.S. Treasury notes was 1.32 percent, up from 1.29 percent before the data was released.
The slowdown in hiring came in August as the spread of the Delta variant caused people to pull back on spending in restaurants and on other services, while businesses have reported challenges in finding new staff. Hiring in the leisure and hospitality sectors was flat, the Labor Department said, after increasing on average of 350,000 per month for the previous six months.
The absence of hiring in the these low-wage sectors helped push overall wage growth higher, Paul Ashworth, an economist at Capital Economics, wrote in a note.
“That puts the Fed in an uncomfortable position — with the slowdown in the real economy and employment growth accompanied by signs of even more upward pressure on wages and prices,†Mr. Ashworth wrote.
Apple announced on Friday that it would delay its rollout of child safety measures, which would have allowed it to scan users’ iPhones to detect child pornography, following criticism from privacy advocates.
“Based on feedback from customers, advocacy groups, researchers and others, we have decided to take additional time over the coming months to collect input and make improvements before releasing these critically important child safety features,†the company said in statement posted to its website.
Apple said in early August that iPhones would begin using complex technology to spot images of child sexual abuse that users upload to its iCloud storage service. Apple also said it would let parents turn on a feature that can flag them when their children send or receive nude photos in text messages.
The measures faced strong resistance from computer scientists, privacy groups and civil-liberty lawyers, because the features represent the first technology that would allow a company to look at a person’s private data and report it to law enforcement authorities.
The tech giant announced the feature after reports in The New York Times showed the proliferation of child sexual abuse images online.
Here’s the full statement from Apple:
Previously we announced plans for features intended to help protect children from predators who use communication tools to recruit and exploit them and to help limit the spread of Child Sexual Abuse Material. Based on feedback from customers, advocacy groups, researchers, and others, we have decided to take additional time over the coming months to collect input and make improvements before releasing these critically important child safety features.
Tyson Foods said it will provide 20 hours of paid sick time a year to fully vaccinated employees to enhance benefits for workers willing to receive coronavirus vaccinations.
The new benefit, announced on Friday, came after discussions with the United Food & Commercial Workers, which represents several thousand Tyson workers, over the company’s requirement that all of its U.S. workers be vaccinated “as a condition of employment†by Nov. 1. The paid sick leave policy takes effect on Jan. 1, and also applies to all nonunion employees.
Tyson also said that fully vaccinated employees can take up to two weeks of paid administrative leave if they test positive for Covid-19 over the next six months. The company said it would compensate workers for time spent in “educational sessions about the benefits and risks of the Covid vaccines.â€
The union had initially expressed reservations when Tyson announced the vaccine mandate last month, but applauded the paid sick leave benefit on Friday, saying it was the first national agreement that provides such a benefit to meatpacking workers. Union officials have said that providing paid sick time is important so workers can still be paid if they miss work or experience some of the vaccines’ common side effects.
“Vaccine mandates, like all Covid workplace safety policies, must be negotiated with workers to build the trust and strong consensus needed for these safeguards to be effective,†the U.F.C.W. president, Marc Perrone, said in a statement.
On Friday, Tyson said that about 90,000, or roughly 75 percent, of its U.S. work force has received at least one dose of the vaccine. More than 30,000 workers have been vaccinated since the company announced its mandate in early August.
Tyson said it now has the support of the U.F.C.W. and the Retail Wholesale and Department Store Union for its vaccine policies. Together, those unions represents more than 80 percent of the company’s 31,000 unionized employees.
“Getting vaccinated remains the single most effective thing we can do to fight this pandemic and continue to help feed this country and our world,†Johanna Söderström, Tyson’s chief human resources officer, said in a statement.
The best indicator of the economy’s health is the Labor Department’s monthly jobs report. Here’s how to decode it:
What is the jobs report based on?
The jobs report is based on two surveys.
One counts people, and the other counts jobs. They generally point to parallel trends, but there are some notable differences.
The household survey counts how many people are in the labor force — either working or actively looking for work.
Lately that’s been around 161 million, still fewer than before the pandemic.
The number that gets the most attention — the overall increase or decrease in jobs — comes from the survey of employers. Before the pandemic, a gain of 100,000 to 200,000 would be considered solid. But with the economy still nearly six million jobs short of where it was before the pandemic, it takes a bigger increase for a report to qualify as good news.
So far this year, the monthly gains have averaged slightly under 600,000.
What is the unemployment rate?
The unemployment rate is the percentage of those people who aren’t working. Early last year, that rate was at its lowest point in decades — 3.5 percent. When the pandemic hit, it shot up to 14.8 percent. It has fallen steadily since then, to 5.2 percent in August.
If the unemployment rate goes up, that isn’t always purely bad news.
Sometimes the number goes down because people have stopped looking for work, so they aren’t counted as part of the labor force.
And sometimes the unemployment rate goes up because more people have decided to look for work but haven’t found a job yet. That can signal economic optimism.
How accurate is the jobs report?
In a fast-moving economy, the numbers behind the monthly jobs report are a bit dated. The household survey is generally conducted on the calendar week that includes the 12th of the month, and the survey of employers is taken in the pay period that includes the 12th.
The employer survey, with a bigger sample, is considered more reliable. But it does not take into account the self-employed, unpaid family workers, domestic help or agricultural workers.
Generally, the numbers are seasonally adjusted. That means the effects of ordinary weather changes, major holidays and school schedules are removed so that underlying trends are more evident.
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Walmart is raising hourly wages for about 565,000 workers in the latest example of a large employer trying to attract and retain employees in a challenging labor environment. The pay raise, which will total at least $1 an hour and will take effect Sept. 25, will apply to workers in departments such as food and general merchandise. The company’s average wage will rise to $16.40, Walmart said, though its minimum wage still lags that of other large retailers such as Target and Amazon. As of Sept. 25, Walmart’s minimum starting wage will rise to $12 an hour from $11.
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Uber postponed its return-to-office date to Jan. 10, after earlier delaying it to Oct. 25 from Sept. 25.
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Locast, a nonprofit streaming service that piped local broadcast signals over the internet, is shutting down after a federal judge ruled against the organization in a rare case tackling the legality of network content delivered online. The organization said it was “suspending operations, effective immediately,†and it added that Locast was meant to “operate in accordance with the strict letter of the law,†but had to comply with the ruling, with which it disagreed.
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A jury of 12 residents of Northern California and five alternates was sworn in on Thursday for the fraud trial of Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, which is set to begin next week. Finding jurors who had never heard of Theranos, which collapsed in 2018 after reports that its blood-testing technology did not work as advertised, was a challenge. Scheduling was another issue. The trial is set to last 13 weeks or longer and some jurors were dismissed because they had upcoming surgeries or long-awaited vacations.
If there is such a thing as an It Girl in venture capital these days, Li Jin would fill the bill. She sits at the intersection of start-up investing and the fast-growing ecosystem of online creators, both of which are red hot.
She formed her own venture firm, Atelier Ventures, last year and has raised a relatively small $13 million for a fund, but Ms. Jin was among the first investors in Silicon Valley to take influencers seriously and has written about and backed creators for years, Taylor Lorenz reports for The New York Times.
A Harvard graduate who was inspired by the ideas of Friedrich Engels and Karl Marx, Ms. Jin, 31, is also aggressively pro-worker. She has made it clear in podcasts and her Substack newsletter that creators should get the same rights as other workers. Among the ideas she has championed is a “universal creative income,†which would guarantee creators a base amount of money to live on.
Now as large venture capital firms flock to influencer start-ups, and as Facebook, YouTube and others introduce $1 billion creator funds, Ms. Jin’s track record has made her a go-to business guru for many digital stars who are trying to navigate the fast-changing landscape.
Hank Green, 41, a top creator on YouTube and TikTok, said he often tossed ideas back and forth with her by phone. Markian Benhamou, 23, a YouTuber with more than 1.4 million subscribers, credited her with understanding what creators go through. Marina Mogilko, 31, a YouTube creator in Los Altos, Calif., said Ms. Jin “started the whole creator economy movement in Silicon Valley.â€
“She was talking about the creator economy years and years and years before anyone else was,†said Jack Conte, a co-founder and the chief executive of Patreon, a crowdfunding site for content creators. “She really sees the future before other people do.â€
Renaissance Technologies said on Thursday it had agreed to settle a long-running dispute with the Internal Revenue Service with a settlement that will require current and former insiders — including its founder — to pay billions in taxes, interest and penalties.
The settlement, which involves 10 years’ worth of trades made by the hedge fund, could be worth as much as $7 billion, according to a person with knowledge of the agreement. That makes it one of the largest federal tax disputes in history, report Matthew Goldstein and Kate Kelly of The New York Times.
James Simons, the mathematician who pioneered an algorithmic approach with the founding of Renaissance, and six other people who were on the board from 2005 to 2015 along with their spouses will pay the additional taxes owed, plus interest and penalties. Mr. Simons will also make a payment of $670 million on top of those obligations.
Included in that group is Robert Mercer, a former Renaissance co-chief whose support of conservative causes — including his help founding the now-defunct political consulting firm Cambridge Analytica — unnerved some of the firm’s investors. Cambridge Analytica was at the heart of a scandal for harvesting Facebook data without users’ consent in a bid to assist Donald J. Trump’s 2016 presidential campaign.
Other investors will also owe taxes and interest, but no penalties, according to a letter that Peter Brown, the firm’s chief executive, sent to investors.
The settlement centered on the firm’s Medallion fund, which manages about $15 billion, mostly for employees and former employees of the firm and their family members. The dispute involved the tax treatment of certain transactions by Renaissance, which specializes in rapid-fire trades. The hedge fund argued that many of its trades were eligible to be taxed at a lower long-term capital gains rate because it had converted them into longer-term holdings through the use of complex financial instruments. The I.R.S. disagreed, saying the short-term rate was appropriate.
The dispute involved a congressional inquiry and a rewriting of I.R.S. guidance that sought to clamp down on that type of trading.