The number of jobs added by the US economy in August was very disappointing, with only 235,000 positions vs. expectations of 720,000.
The figure was well down on the 1.05 million jobs created in July, adding to fears that the recovery from the pandemic may be running out of steam.
Despite the disappointing hiring levels, the unemployment rate fell to 5.2% in August from 5.4% in July.
Economists say rising infections caused by the Delta variant have hit spending on travel, tourism and hospitality.
They also note that the Labor Department’s data was collected in the second week of August, so does not reflect the impact of hurricanes Ida and Henri in the second half of the month.
President Joe Biden said he was disappointed but defended his record on the economy, saying it was growing consistently.
“Total job creation in the first seven months of my administration is nearly double, double any prior first-year president,” he said.
“While I know some wanted to see a larger number today, and so did I, what we’ve seen this year is a continued growth, month after month in job creation.”
According to the US Bureau of Labor Statistics, there were notable job gains in August in professional and business services, transportation and warehousing, private education and manufacturing.
However, employment declined in retail and was flat in leisure and hospitality, after increasing by an average of 350,000 per month over the previous six months.
While the number of people unemployed edged down to 8.4 million, it remains well above the pre-pandemic level of 5.7 million seen in February 2020.
Average earnings also jumped in August, suggesting that employers are trying to lure workers back amid labor shortages in some industries.
The US economy contracted sharply in 2020 during lockdown but has rebounded strongly in 2021.
House prices are rising and corporate results remain strong. However, like most economies, the US is facing supply chain issues that have dragged on manufacturing growth.
Inflation has also jumped as the economy reopens, although the Federal Reserve believes the rise will be transitory.
According to the International Monetary Fund, the US and UK economies will expand more slowly in 2017 than previously predicted.
The IMF said “weaker-than-expected activity” in Q1 of 2017 meant the UK would grow by 1.7%, compared with an earlier 2% forecast.
The IMF also revised down its US growth forecast from 2.3% to 2.1%.
However, the IMF’s overall global economic predictions – of 3.5% growth in 2017 and 3.6% in 2018 – remain unchanged.
The UK growth forecast for 2018 remains unchanged at 1.5%, but US growth for next year is now predicted to come in at 2.1%, instead of the 2.5% previously forecast.
In its latest World Economic Outlook, the IMF said the “pick-up in global growth” that it had anticipated in its previous survey in April remained “on track”.
However, the IMF added that while the global growth projection was unchanged that masked “somewhat different contributions at the country level”.
It said that the main factor behind its downward revision for US growth in 2018 was “the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of US fiscal policy changes”.
“Market expectations of fiscal stimulus have also receded.”
President Donald Trump’s administration had been widely expected to pursue policies including tax cuts and infrastructure investment to try to boost the US economy.
However, the chances of Trump’s administration being able to push through these policies now appears less likely.
The IMF’s outlook for several eurozone economies was brighter than initially thought, with countries including France, Germany, Italy and Spain seeing growth forecasts revised up.
The biggest eurozone revisions were for the Spanish and Italian economies. Spain is now forecast to grow 3.1% in 2017, up from the previous prediction of 2.6%. Italy’s 2017 growth forecast has risen from 0.8% to 1.3%.
The euro area as a whole is expected to grow by 1.9% in 2017, up from 1.7%.
The IMF said first-quarter growth in many of those countries was better than expected, and that there was evidence of “stronger momentum in domestic demand than previously anticipated”.
China’s growth projections have also been revised up, reflecting, the IMF says, “a strong first quarter of 2017 and expectations of continued fiscal support”.
Its 2017 forecast has risen from 6.6% to 6.7%, while growth in 2018 is now expected to be 6.4% instead of 6.2%.
The IMF hailed China’s “policy easing and supply-side reforms”, including efforts to reduce excess capacity in the industrial sector.
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