Job Growth Slackens, Signaling Vulnerability of Recovery

Job growth slowed further last month, the latest sign that the economy’s spring momentum has faded — and a warning that the recovery could go into reverse this fall without further government support.

U.S. employers added 1.4 million jobs in August, the Labor Department said Friday, down from the gains in the three previous months. The slowdown would have been more pronounced without the hiring of nearly a quarter-million temporary census workers.

The report held some good news: The unemployment rate fell by more than expected, to 8.4 percent. In April — when joblessness was the highest since the Great Depression — forecasters at the Congressional Budget Office said unemployment would remain in the double digits well into next year.

But an increasing number of people reported in the Labor Department’s August survey that they had lost their jobs permanently, rather than being temporarily laid off or furloughed — a sign that the crisis is doing lasting damage.

“There’s a fragility in the numbers,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “There are cracks in the underlying foundation.”

Those cracks are appearing as trillions of dollars in federal spending, which helped sustain many households and businesses early in the pandemic, are drying up.

A $600 weekly federal supplement to unemployment benefits expired in July; a $300-a-week replacement, announced by President Trump last month, has been slow to kick in and will last for only a few weeks. The government’s marquee business relief effort, the Paycheck Protection Program, ended in August.

Economists warn that would set the stage for a big drop in spending in the fall, leading to more job losses and a wave of small-business failures. Corporations including American Airlines have announced they are laying off more workers or, as in the case of the department store stalwart Lord & Taylor, going out of business.

Mr. Trump cheered the report on Twitter. “Great Jobs Numbers,” he declared, highlighting the unemployment rate’s decline into single digits as “faster and deeper than thought possible.”

His Democratic opponent, former Vice President Joseph R. Biden Jr., said in Wilmington, Del., that “any job added back is positive.” But when working people are asked “how do they feel about the economy coming back,” he said, “you’ll find they don’t feel it.”

Economists said the slowdown was a worrying sign that the low-hanging fruit of the recovery — the rehiring of millions of furloughed restaurant, hotel and entertainment workers — could be largely gone.

Just 174,000 jobs were added last month in leisure and hospitality, a disappointing gain for an industry that lost more than eight million to the pandemic and has recovered only half. And as companies reopen, many are discovering that with demand still weak, they don’t need or can’t afford as many workers as before the pandemic.

Marcus Hotels, which operates more than a dozen hotels, mostly in the Midwest, began reopening its properties in June and has brought back about 60 percent of the nearly 4,000 employees it had before the pandemic. But in recent weeks, it has begun permanently laying off many of the employees who remained on furlough.

“We held out as long as we could, waiting to see what was going to happen,” said Michael Evans, the president of Marcus, who added that it had paid benefits for employees as long as they were furloughed.

Mr. Evans said that he thought the hotel business would bounce back eventually, but that it could take years to return to its previous level. And even when it does, he said, Marcus will probably not need as many workers.

“As we’ve planned for the reopenings, we re-evaluated our entire business model,” he said. “If business were back to normal right now, we would still operate more efficiently.”

Decisions like the ones at Marcus mean that workers like Kara Hanley could have a hard time getting back to work.

Ms. Hanley, 23, was furloughed in March from her job as a room-service supervisor at a Marriott hotel in Orlando, Fla. At first, she expected the furlough to last a few weeks. Then, as weeks passed and she didn’t get a call, she thought she might be waiting until late summer, or perhaps Christmas.

When the phone rang on Sept. 1, she assumed that Marriott was calling to tell her it was finally time to return to work. Instead, she learned she was being laid off, effective Sept. 18.

“I really didn’t think that I was going to get let go,” she said. “I just kept thinking, when they need me, they’re going to call me back.”

The emergency spending programs that Congress passed last spring were meant to help prevent that kind of lasting economic harm. Forgivable loans to small businesses were intended to help avert bankruptcies and layoffs. Enhanced unemployment benefits were intended not just to prevent hunger and homelessness among the jobless, but also to minimize the cascade of economic damage that would follow.

Those programs, despite a rocky start, were largely successful. A wave of foreclosures has yet to occur. Consumer spending rebounded strongly in May and June, and companies began recalling furloughed workers. But without a new round of aid, much of that progress could be lost, with lasting economic consequences.

“I am more concerned about where the economy is now than I was in April,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative. “In April, it was fixable. We’re just letting the scars build up now.”

H. Brandon Williams was supposed to spend this month celebrating the third anniversary of FishScale, his restaurant in Washington, D.C. Instead, he is trying to keep his business afloat.

But the business isn’t out of the woods. Nearby Howard University recently announced that it would shift its undergraduate classes online for the fall semester and close its dormitories. FishScale also relied on revenue from sales at a seasonal farmers’ market, which didn’t open this year.