The economy fell short of expectations and added just 194,000 new jobs in September as the delta variant held back commerce.
Economists had expected 473,000 new jobs.
The unemployment rate fell to 4.8%, the Bureau of Labor Statistics reported Friday.
While it is unclear exactly what held back job growth, the result will likely come as a bit of a surprise to those who anticipated that the cessation of supercharged federal unemployment benefits on Labor Day would lead to a boost in people finding jobs.
“Some have thought the end of pandemic employment benefits would bring a rush of potential workers back into the equation. We’re not seeing that yet,” said Mark Hamrick, Bankrate senior economic analyst.
There was a 123,000 drop in government jobs, but private payrolls increased by 317,000. The leisure and hospitality industry, which stagnated during the worst of the pandemic, saw the addition of 74,000 jobs, while retail added 56,000.
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The U.S. has been grappling with labor shortages since the economy began to emerge from the COVID-19 pandemic. In addition to the unemployment benefits, other factors are also seen as holding back the labor market, including early retirements, an aging population, more people identifying as self-employed, and childcare constraints.
“Combined, these factors had lowered the pool of prospective employees by over 8 [million] through August, of which 5.6 [million] will persist after federal UI benefits expired in September,” Goldman Sachs researchers said in a report this week.
While Democrats touted the expanded benefits, which provided beneficiaries $300 weekly payments, Republicans pointed out that in many cases, people ended up making more money by collecting from the program than they did at their previous jobs.
The national average of statewide unemployment insurance prior to the health crisis was $387 per week, which means that unemployed people in the U.S. were taking home $687 on average when the expansion was tacked on. That equated to a $17.17 hourly wage — more than double the federal minimum wage.
The Goldman Sachs researchers said that of the 5.3 million people receiving benefits as of Labor Day, about 2.7 million earned more from the unemployment program than they did from their previous job.
The worse-than-anticipated jobs report comes a day after the weekly jobless report exceeded expectations. The number of new applications for unemployment benefits fell 38,000 last week to 326,000, the Labor Department reported on Thursday. The number was less than forecasters’ expectations of 348,000.
President Joe Biden and Democrats hoping to further bolster the economy through a multitrillion-dollar infrastructure and social spending package that will include a menu of tax hikes. While Democrats predict the legislation will bolster the jobs market, Republicans fear the spending could accelerate inflation and be a net negative for the economy.
The U.S. Chamber of Commerce invoked the legislation in a statement after news of the grim September jobs report.
“As shocking as today’s employment figures are, even more troubling is the decline in the labor force. We are in the midst of a worker shortage crisis and the number of potential workers is shrinking,” said Neil Bradley, Chamber executive vice president. “Multi-trillion tax and spend proposals in Washington will only make matters worse. It is time for Congress to set that aside and focus on helping Americans get back to work and helping employers fill open jobs.”
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Rep. Kevin Brady, the top GOP tax writer, called the report “dreadful news” for the U.S. economy.
“If this were a football team with this losing record, the coach would be searching for a new job at this point,” the Texas Republican said.
