Job creation stumbled in August as the U.S. economy added the fewest number of new workers in seven months, an abrupt slowdown driven largely by a standstill in hiring at bars, restaurants and hotels.
The Labor Department said in its Friday report that employers added 235,000 jobs last month, sharply missing Wall Street's expectations for a gain of 728,000. It marked a noticeable slowdown after solid gains of 1.1 million in July and 962,000 in June.
The unemployment rate ticked down slightly to 5.2%.
Leisure and hospitality, one of the industries hit hardest by the coronavirus pandemic, dragged on job growth last month, with a net gain of zero. It's a stunning turnabout for a sector that, for months, has accounted for the bulk of job creation each month. There are about 1.7 million fewer jobs in leisure and hospitality than there were in February 2020, before the pandemic began.
A closer look at the data shows that while hotels added 6,600 jobs in August, restaurants and bars slashed about 41,500 jobs. That was offset by a payroll gain of 36,000 jobs in arts, entertainment and recreation.
Employment in leisure and hospitality is down by 1.7 million, or 10%, since February 2020.
"The delta variant surge is the unsurprising story behind August’s big payroll miss," said Ryan Detrick, chief market strategist at LPL Financial. "Leisure and hospitality jobs, a proxy for economic reopening, were flat month over month. The good news is that we see promising signs Delta’s effect will wane in coming months and payrolls will resume growing at a fast clip."
Other industries also stumbled in August: Retail trade shed 28,500 jobs last month, with the bulk of those stemming from home and garden stores (-13,000), food and beverage stores (-23,200) and clothing stores (-4,000).
The government, meanwhile, was also a drain of job growth, cutting 8,000 positions. Those losses stemmed from state governments, which saw payroll shrink by 25,000. That was balanced out by the federal government, which added 3,000 jobs, and local government, which added 14,000.
Health care and social assistance eliminated 4,600 jobs, while construction lost 3,000 and utilities lost 1,300.
The bulk of the job creation stemmed from professional and business services, which contributed 74,000 new positions last month. It was followed by gains in transportation and warehousing (53,200) and manufacturing (37,000).
Education, meanwhile, added more than 40,000 jobs, reflecting the continued resumption of in-person learning and other school activities across the country.