US Economy records staggering employment growth despite disappointing growth - August 2021
Updated: Aug 17, 2021
US Economy exceeded employment expectations in July as 943,000 new jobs were created. Forecasts for jobs created last month had varied widely from 350,000 to 1.6million with figures dampened by the surge of infections. Strength in the employment sector saw the US unemployment rate fall from 5.9% to 5.4% with 8.7 million individuals remaining unemployed. However, this figure is down considerably from the peaks seen in April 2020 but remain well abocve the pre-pandemic measure of 5.7 million in February 2020. UK director at Charles Schwab, Richard Flynn, , has mentioned that these figures were "an encouraging sign for markets that the economic reopening has kicked into a higher gear".
The strength of the US Economy’s recovery hinges on the uncertainty of new restrictions that can be imposed. Whilst in the first 3 months of the year, the US economy rebounded faster than expected, recovery has slowed to 6.5%, following a rise in COVID-19 cases. This level remains far below forecasts of 8.5% growth, amidst easing in both monetary and fiscal stimulus that has worried investors about a faster than expected slowdown. Official figures from the US Commerce Department has revealed a rise in consumer spending by 11.8%, supported by the release of $1,400 stimulus household cheques as part of Joe Biden’s $1.9 trillion pandemic relief in March.
Despite current improvements in labour market data, a surprising labour shortage is persisting with employers unable to fill a record number of job vacancies. The blame lies on the lack of affordable childcare, health concerns of the virus and other pandemic-related retirement from the labour force. A lack of voluntary response from the labour market will continue to weigh down on output production but with COVID-19 sensitives fading, there should be an opportunity to observe greater employment gains.