# Subsiding Delta wave seen boosting U.S. job growth; worker shortages still a constraint
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-11-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: US Job Growth Accelerates in October: Economic Recovery
Meta Description: Despite worker shortages, U.S. job growth is expected to speed up in October amid improving economic activity and falling COVID-19 cases.
URL: https://financedigest.com/subsiding-delta-wave-seen-boosting-u-s-job-growth-worker-shortages-still-a-constrainthtml

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By Lucia Mutikani

WASHINGTON (Reuters) – U.S. [job growth](https://www.financedigest.com/u-s-job-growth-powers-ahead-unemployment-rate-at-3-4.html "U.S. job growth powers ahead; unemployment rate at 3.4%") likely accelerated in October as the headwind from the surge in COVID-19 infections over the summer subsided, offering more evidence that economic activity was regaining momentum early in the fourth quarter.

But the Labor Department’s closely watched [employment report on Friday is expected to show worker](https://www.financedigest.com/more-than-half-of-workers-are-open-to-leaving-their-current-employers.html "MORE THAN HALF OF WORKERS ARE OPEN TO LEAVING THEIR CURRENT EMPLOYERS") shortages persisting, even after federal government-funded unemployment benefits have expired and schools have reopened for in-person learning.

Nonetheless, it will join rising consumer confidence and services sector activity in painting a more favorable picture of the economy, after the Delta variant of the coronavirus and economy-wide shortages of goods restrained [growth in the third quarter to its slowest pace](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") in more than a year.

September was a bad dream, but since then [vaccines have beaten back the Delta](https://www.financedigest.com/israels-covid-19-vaccine-boosters-show-signs-of-taming-delta.html "Israel’s COVID-19 vaccine boosters show signs of taming Delta") virus and the economy is marching forward and upward,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University in Los Angeles. “We could have seen employment gains probably approaching 800,000, the primary constraint is labor shortages.”

[Nonfarm payrolls](https://www.financedigest.com/dollar-tumbles-as-u-s-nonfarm-payrolls-show-mixed-picture.html "Dollar tumbles as U.S. nonfarm payrolls show mixed picture") likely increased by 450,000 jobs last month, according to a Reuters survey of economists. The economy [created 194,000 jobs](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created") in September, the fewest in nine months.

October’s anticipated job [gains](https://www.financedigest.com/dollar-jumps-as-u-s-job-gains-wage-growth-beat-expectations.html "Dollar jumps as U.S. job gains, wage growth beat expectations") would bring employment about 4.5 million jobs below its peak in February 2020. Estimates ranged from as low as 125,000 jobs to as high as 755,000.

Education employment is a [wild card after sharp drops in payrolls at state and local governments](https://www.financedigest.com/reining-in-the-wild-horse-governing-an-idea.html "Reining in the Wild Horse: Governing an idea") as well as private institutions contributed to curbing job growth in September.

Pandemic-related staffing fluctuations in education have distorted normal seasonal patterns. Shortages of bus [drivers and other support staff have been well](https://www.financedigest.com/finance-transformation-cloud-solutions-can-catalyst-process-improvement-well-driver-business-transformation.html "Finance Transformation: How cloud solutions can be a catalyst for process improvement as well as a driver of business transformation.") documented. Education hiring in September was lower than usual, resulting in a decline after stripping seasonal fluctuations. Economists believe October was the same story.

We think that seasonally adjusted education-related [employment could fall](https://www.financedigest.com/uk-employers-see-slight-fall-in-pay-awards-over-2023-xperthr.html "UK employers see slight fall in pay awards over 2023 – XpertHR") by another 50,000 in October, as the increase in hiring that month anticipated by the seasonal factors does not fully materialize,” said Daniel Silver, an economist JPMorgan in New York.

Education payrolls dropped by 180,000 jobs in September.

The [drop in COVID-19 cases](https://www.financedigest.com/happy-parents-head-to-the-sunshine-as-uk-councils-drop-term-time-holiday-cases.html "HAPPY PARENTS HEAD TO THE SUNSHINE AS UK COUNCILS DROP TERM-TIME HOLIDAY CASES") has allowed Americans to travel, attend sporting events and frequent restaurants, boosting demand for workers.

IMPROVED OUTLOOK

Indeed, [labor market](https://www.financedigest.com/u-s-job-growth-surges-in-july-as-labor-market-defies-recession-fears.html "U.S. job growth surges in July as labor market defies recession fears") indicators were fairly strong in October, with the ADP National Employment Report on Wednesday showing an acceleration in private payrolls. The Conference Board’s [labor market differential – derived from data](https://www.financedigest.com/dollar-firms-after-u-s-labor-data-suggests-more-rate-hikes.html "Dollar firms after U.S. labor data suggests more rate hikes") on consumers’ views on whether jobs are plentiful or hard to get – hit a 21-year high.

The number of Americans filing new [claims for unemployment benefits](https://www.financedigest.com/why-you-might-want-to-wait-until-age-70-to-claim-social-security-benefits.html "Why You Might Want to Wait Until Age 70 to Claim Social Security Benefits") fell below 300,000 in October and has remained under that level for four straight weeks.

The [unemployment rate](https://www.financedigest.com/spains-unemployment-rate-inches-up-to-12-87-in-q4-2022.html "Spain’s unemployment rate inches up to 12.87% in Q4 2022") is forecast falling to 4.7% from 4.8% in September. While companies desperately want to hire, millions remain unemployed and outside the labor force.

This labor market disconnect has been blamed on caregiving needs during the pandemic, fears of contracting the coronavirus, [early retirements](https://www.financedigest.com/how-to-retire-early.html "How to retire early"), massive savings and career changes as well as an aging population and the recently ended expanded unemployment benefits. There were 10.4 million unfilled [jobs as of the end](https://www.financedigest.com/hp-to-cut-about-12-jobs-by-end-of-fiscal-2025.html "HP to cut about 12% jobs by end of fiscal 2025") of August. About five [million people](https://www.financedigest.com/the-start-up-using-technology-to-help-the-20-million-people-in-britain-with-money-worries.html "The start-up using technology to help the 20 million people in Britain with money worries") have left the labor force since the pandemic started.

Federal Reserve Chair Jerome [Powell told reporters on Wednesday that “these impediments to labor supply should diminish with further progress](https://www.financedigest.com/dollar-falls-to-nine-month-low-as-powell-notes-progress-in-disinflation.html "Dollar falls to nine-month low as Powell notes progress in disinflation") on containing the virus, supporting gains in employment and economic activity.

The Fed announced it would this month start scaling back the amount of money it is pumping into the economy through [monthly bond](https://www.financedigest.com/investors-flee-uk-bonds-pushing-gilts-to-huge-monthly-loss.html "Investors flee UK bonds, pushing gilts to huge monthly loss") purchases.

STRUCTURAL SHIFT

According to Beth Ann Bovino, chief economist at S&P [Global Ratings](https://www.financedigest.com/rate-rise-fears-prompt-third-week-of-global-equity-funds-outflows.html "Rate rise fears prompt third week of global equity funds outflows"), there was no evidence that generous pandemic jobless benefits discouraged the unemployed from seeking work. Bovino said the reason for people not taking up jobs appeared to stem more from the decision to drop out of the workforce entirely, signaling a structural [shift rather than a temporary change](https://www.financedigest.com/the-change-perspective-uks-financial-institutions-shift-focus-to-revenue-growth-in-2019.html "The Change Perspective: UK’s financial institutions shift focus to revenue growth in 2019").

She also [noted that many people who moved out of cities during the pandemic](https://www.financedigest.com/uk-house-prices-end-2022-on-a-weaker-note-after-pandemic-boom.html "UK house prices end 2022 on a weaker note after pandemic boom") have yet to return, which could create a mismatch between the open jobs and location.

The labor [market conditions since the pandemic began highlight](https://www.financedigest.com/n-butylene-oxide-12-market-expectations-growth-trends-highlighted-until-2028.html "N-Butylene Oxide 1,2 Market Expectations & Growth Trends Highlighted Until 2028") a possible structural shift in the labor force, with 60% of the five million missing workers comprising people who have left the workforce entirely,” said Bovino.

There are concerns that worker [shortages could be exacerbated by the White House’s](https://www.financedigest.com/will-pdr-prove-the-saviour-for-the-uks-housing-shortage.html "Will PDR prove the saviour for the UK’s housing shortage?") vaccine mandate, which comes into effect on Jan. 4 and applies to federal government contractors and [businesses with 100 or more employees](https://www.financedigest.com/why-investing-in-employee-health-can-be-good-for-business.html "Why investing in employee health can be good for business").

There has also been a rise in [strikes as workers](https://www.financedigest.com/uks-royal-mail-workers-to-strike-in-run-up-to-christmas.html "UK’s Royal Mail workers to strike in run-up to Christmas") take advantage of the tight labor market to demand more pay and better conditions. The walk out by about 10,000 Deere & Co workers will have no [impact on October’s payrolls as it started in the middle of the period during which the government surveyed households and businesses](https://www.financedigest.com/exclusive-qatarenergy-boss-says-world-cup-tension-will-not-impact-german-business.html "Exclusive-QatarEnergy boss says World Cup tension will not impact German business") for the employment report.

Recent strike activity and [vaccine mandates have been challenging factors on the supply](https://www.financedigest.com/gsk-expects-us-launch-of-rsv-vaccine-with-no-supply-issues.html "GSK expects US launch of RSV vaccine with no supply issues") front and suggest that labor market improvement will be gradual in coming months,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

The scramble for workers is boosting wage growth, which together with record savings should help to underpin consumer [spending over the holiday](https://www.financedigest.com/brits-spend-less-than-a-quarter-of-their-holiday-exploring-the-destination.html "Brits spend less than a quarter of their holiday exploring the destination") session, though salaries are lagging inflation and shortages of goods abound.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)


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