“Delta means a bumpy road until the public decides they have to leave the public health crisis behind – and that means vaccinations,” said Joseph Brusuelas, chief economist at RSM, a consultancy that advises midsized companies. “It is now in the hands of the public, not politics.”
The surge in coronavirus cases has led major forecasters to trim their economic outlook for the third quarter, although some believe the economy will pick up again after that. Goldman Sachs, for example, cut its July-September growth forecast from 9 percent to 5.5 percent and said the impact of the Delta variant was “slightly larger than we expected.”
There’s a growing stack of data backing the impact of the resurgent coronavirus, some showing a slowdown in the labor market: the number of employees fell 4 percent from July to August, and the number of stores opened fell 2.5 percent on planning software -Company homebase.
The decline was sharpest in entertainment, where employment growth declined 35 percent over the month, and hospitality, where it declined 20 percent. And contract processor ADP noted this week that private sector jobs only rose 374,000 last month, which fell far short of economists’ expectations.
In general, consumer sentiment fell more than 13 percent in August to reflect “the worst economic outlook in over a decade,” according to the University of Michigan’s Consumer Sentiment Index. Richard Curtin, the poll’s chief economist, said this was in part an emotional response that “reflects shattered hopes that the pandemic may end soon and life may return to normal”.
The White House and its allies downplay concerns about the economic impact of the Delta variant and instead focus on passing infrastructure laws through Congress, claiming that the problem is the coronavirus and not the underlying economy.
A White House official said the government “always knew that returning from a century of pandemic would be a massive undertaking”. And Jason Furman, a top Biden White House economic advisor to President Barack Obama, said that while Friday’s job numbers will be the clearest indication of whether Delta is having a big impact on the recovery, the impact will be temporary will be .
“It takes us from very, very fast to very fast,” said Furman. “Nobody talks about removing jobs. Is it just a matter of slowing employment growth? “
Certainly other indicators point to sustained growth in many sectors. Labor demand remains strong, with active online job postings increasing 13 percent across the country from July to August, according to ZipRecruiter, an online job search platform. The pace of vaccinations is also picking up, and coronavirus cases appear to be leveling off – two areas of progress that would also have great economic benefits if continued.
Still, the surge in coronavirus cases and the impact on the economy could worsen the outlook for the unemployed as federal expanded unemployment benefits across the country are phased out. According to an analysis by Andrew Stettner, a Senior Fellow of the Century Foundation, an estimated 7.5 million workers will lose access to additional aid if the programs that Congress put in place at the height of the pandemic end on September 6.
“This is a five alarm fire that we are treating as if nothing is wrong,” he said. “It is an act of political negligence to allow a record number of workers to be completely cut off from unemployment benefits when the Delta variant increases, which threatens the economic progress we have made.”
Another deterioration in the economic outlook is the Supreme Court’s decision to block the state eviction moratorium, which some estimates could see at least 750,000 tenant households losing their homes this year.
Congress created three federal unemployment insurance programs to respond to the onslaught of pandemic layoffs under the CARES bill of March 2020. Taken together, the three programs have given unemployed workers an additional $ 300 per week, expanded benefits to those, such as gig workers, who were traditionally not eligible, and extended the length of state unemployment insurance.
Legislators extended these programs several times during the pandemic. But amid complaints from low-wage industries of labor shortages and 26 states killing their participation in the programs early, there was little appetite from the White House or Capitol Hill to resume the programs another time.
While conservative lawmakers have argued that the programs were too generous and discouraging people from returning to work, research suggests that quitting them might actually have the opposite effect: forcing more workers out of the labor market and drastically cutting economic spending .
According to research by Arindrajit Dube, professor of economics at UMass Amherst, only one in eight workers who had lost unemployment benefits when their state prematurely ended programs had found a job by August. He estimates that if the Labor Day programs were completely stopped, it could cut spending by as much as $ 8 billion in September and October.
“That will potentially add some headwind to the recovery,” said Dube. “The thought was that this would accelerate the recovery in jobs. I think that’s probably too optimistic.”
The risk for the labor market coming from autumn is less that the delta variant will lead to lower demand for hiring than that the labor supply could remain scarce if the increase in cases results in workers remaining on the sidelines. Despite the increase in vaccinations, the number of unemployed, largely due to concerns about the contagion or spread of the coronavirus, rose from 2.5 million to 3.2 million between late July and mid-August. The data from the US Census Bureau show.
That is an increase of nearly 30 percent in two weeks, underscoring the concern of some economists and employers that recruitment problems may persist even after unemployment benefits have expired.
At the same time, the uncertain nature of return to school for unvaccinated children can also dampen return to work for parents, especially mothers, and their participation in the labor force could decline if school outbreaks result in children being sent home.
“It is difficult for parents (especially mothers) to fully integrate into work with this type of uncertainty,” said Misty Heggeness, senior economist at the Census Bureau who has conducted extensive research on women in the workforce, in an e- Mail. “With the spread of the Delta variant through August and into September, such situations are becoming more and more likely.”
Rebecca Rainey contributed to this story.