The headline numbers in today’s jobs report are largely encouraging. The U.S. economy added 1.4 million jobs in August as employers continued to bring back workers, and the unemployment rate fell to 8.4 percent. But here are four reasons for concern. 

1. The jobs recovery is slowing down.

Government employment rose by 344K in August, largely due to the hiring of temporary census workers, whose contracts end in September. Growth in private sector payrolls was just 1.0 million in August, down from 4.7 million in June and 1.5 million in July. Private sector employment is still 10.7 million below its pre-COVID February level, so the recovery is slowing despite having a very long way to go.

2. Long-term unemployment is rising.

The number of people who have lost a job permanently (not due to a temporary layoff) rose from 2.9 million to 3.4 million. At the same time, the median duration of unemployment continued to rise to 16.7 weeks, up from 15.0 in July and 9.0 a year ago. As long-term unemployment swells, the current crisis could lead to scarring in the labor market, with workers ending up in lower-paying jobs or dropping out of the labor force altogether.

3. The pandemic has reduced female labor force participation.

The number of men in the labor force rose by 273K in August, while the number of women rose by a mere 23K. So while male labor force participation recovered from 77.6% to 78.8% in August, female labor force participation remained flat at 58.7%. A recent ZipRecruiter survey found that school closures are disproportionately reducing female labor supply.

4. Several industries are still shedding jobs amid disruption caused by the pandemic.

Nursing and residential care facilities, which have been the epicenter of the public health crisis, shed -13.7K jobs in August. According to a recent survey of nursing home providers, 97% of nursing homes said they had lost revenue due to the pandemic, 55% said they are currently operating at a loss, and 40% said they’ll likely be unable to sustain operations another 6 months.

The oil and gas industry also continued to lose jobs (-1.1K in oil & gas extraction and -0.9K in support activities for mining), as the pandemic-related slowdown in economic activity reduced global demand for oil. In the U.S., air travel is still down roughly 70% year-over-year and gasoline consumption is still down 11%.

Other industries that are continuing to struggle with the pandemic’s effects on business include auto manufacturers (-5.3K), travel agencies (-2.9K), the facilities support services industry (-2.5K), and the advertising industry (-1.9K).

The overall takeaway from the report is that the private sector has now recovered 10.5 million of the 21.2 million jobs lost at the start of the pandemic, or just under half (49%). But the pace of recovery is slowing. If it decelerates any further, the recovery will be counted in years, not months. 

ZipRecruiter job posting data suggest that labor market conditions have deteriorated since the mid-August reference week in the jobs report. That could signal a weaker report in September unless economic activity picks up or the economy receives additional fiscal support. 

One thing to remember is that without the pandemic, employment could have continued growing at a pace of roughly 200K per month as it had done for 10 years prior. So, to quote policy economist Ernie Tedeschi, every month, the hole we need to fill gets a little deeper.