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Hiring slowed sharply in August as a new surge in coronavirus infections slammed the brakes on the economic recovery. 

U.S. employers added just 235,000 jobs last month, a sharp slowdown from the torrid pace of hiring in June and July.  

"The labor market recovery has downshifted," said Nela Richardson, chief economist for the payroll processing company ADP. "The U.S. economy is facing increasing headwinds as the pandemic wears on and the delta variant creates uncertainty."

The unemployment rate fell to 5.2 percent in August from 5.4 percent in July. 

 nearly 20 percent in the last two weeks, while COVID-19 deaths have nearly doubled during that period. The worsening public health outlook threw a late-summer speedbump in the recovery, making people more cautious about traveling and eating out and reducing the need for workers. 

Restaurants and bars cut 42,000 jobs in August, after adding 253,000 in July. 

Homebase, which makes scheduling software for small businesses, saw a 

notable decline in hours worked last month

 — especially in the entertainment and hospitality industries. 

"We are hearing anecdotally from our customers that absolutely it is a result of COVID," said  CEO John Waldmann. "We are seeing similar trends in the data from what we saw last year and January of this year. It would be hard-pressed to say this is not COVID-related."

The slowdown in the Homebase data was particularly pronounced in the southeast, where COVID cases are especially high. New England, where case counts are lower, fared somewhat better. 

The spike in new cases has also discouraged some people from returning to work. And it threatens to disrupt in-person schooling, which could make it harder for parents to hold down jobs. 

"All of us who care about small businesses really wanted to be optimistic that a lot of the things keeping people from work were going to start to heal themselves into the fall," Waldmann said. "Unfortunately, it looks like we're going to be dealing with challenges here for a little bit longer."

The slowdown in hiring comes just as emergency unemployment benefits that Congress authorized earlier in the pandemic are about to expire. In mid-August, more than 12 million people were receiving some form of jobless aid. Most will receive their 

Warehouses and delivery services added 53,000 jobs last month — as the online retail business continues to expand. 

Manufacturing is another bright spot in the economy, with new orders and output both accelerating in August. But factories continue to struggle to find enough parts and workers. 

Factories added 37,000 jobs last month, up from 27,000 the month before.

"Companies want to hire more people," said Tim Fiore, who oversees a monthly survey of factory managers for the 

. "There's no doubt that demand is calling for more people and they can't get them." 

Fiore said many factories are facing increased turnover, as workers depart for higher wages elsewhere. 

Wages have been rising, especially in restaurants and hotels. But 

, eroding workers' buying power. Private sector wages in August were up 4.3 percent from a year ago. But that's not keeping pace with inflation, which was 5.4 percent in July — matching the highest rate in nearly 13 years.  

Business and Economic News

Health

COVID-19

Scott Horsley

Author

Hiring slowed in August as a surge in new coronavirus infections weighed on the economic recovery. Employers added just 235,000 jobs last month, a sharp drop from June and July.  

U.S. hiring slows sharply as latest coronavirus surge slams brakes on economy

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