The start of the school year was supposed to bring sorely needed relief for parents struggling with child care. But the surge of the delta variant has forced dozens of school districts around the U.S. to postpone their return to the classroom, frustrating millions who had been eager to return to work.

At least 90,000 children have had to isolate themselves from their classmates because of exposure to COVID-19 since the beginning of the month, according to an analysis from The Hill. That number is likely to climb as more schools open in September and students face new risks from a virus that had largely brushed over them earlier in the pandemic.

“Delta is much more transmissible than earlier variants and it is reaching kids, so I think parents are right to be concerned if kids head back to school in a congregate setting,” said Julia Raifman, an assistant professor at the Boston University School of Public Health.

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“We can definitely see that hospitalizations of children are at a record high now, and earlier in the pandemic, kids were less affected than they are now,” she added.

With their children in unprecedented danger of contracting the coronavirus, many parents have been plunged back into a bind, with severe implications for the economic recovery. Those who either lost their jobs due to the pandemic or had to step away from work to look after their children are once again facing a significant barrier on the way back.

Economists say it’s difficult to know just how many people have been forced out of the labor market specifically because of child care responsibilities. But 1.6 million Americans were out of work and did not search for a job in July because of a reason related to the pandemic, according to the Labor Department.

“It forces parents to make a hard choice. It puts you in a situation where you could be called at any moment to pick up your kid immediately and take them home indefinitely for goodness knows how long,” said Julia Pollak, chief economist at ZipRecruiter.

“That is just not compatible with most jobs in our economy,” she continued. “Jobs in hospitals, in schools, restaurants, hotels, delivery jobs, warehouse jobs — those all cannot operate that way.”

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The onset of the pandemic wiped out roughly 8.8 percent of jobs in public education as schools were forced to shutter, but Pollak said the delta surge is unlikely to trigger deeper layoffs. Instead, she expects delays to office reopenings driven by school closures to limit the recovery of other jobs reliant on work travel and office presence.

“It will reduce demand for those central business district service industries — the restaurants and cafes, the dry cleaners, laundromats, salons, spas. Those kinds of places are likely to actually respond by cutting jobs or delaying people's start dates,” she said.

The August jobs report, set to be released Friday, will give policymakers some insight into how the economy has responded to the delta surge. The U.S. added 943,000 jobs last month, according to the most recent report, but that data was compiled before the Centers for Disease and Control and Prevention first raised alarms about the transmissibility of the delta variant.

Though it may still take several months to assess the total impact of the delta variant, economists expect that women and Black and Hispanic workers, who were more likely to lose their jobs amid the onset of the pandemic, will continue bearing disproportionate burdens.

Pollak said that while both mothers and fathers have pared back their work during the pandemic, a greater proportion of women have dropped out of the labor force entirely, while men have primarily reduced their hours.

Kathryn Anne Edwards, an economist at the RAND Corporation, said her research has shown that the more children a woman had, the more likely she was to drop out of the labor force during the pandemic. Labor force participation among women with three or more children fell by 4 percentage points, she said.

“I don't know the extent to which working mothers, mothers who were working at some point or who wanted to work — I don't know that they'll ever really recover from the pandemic. I hope that they do,” Edwards said.

Prolonged periods of unemployment are often red flags for hiring managers, a threat for millions of Americans who’ve lost their jobs since the start of the pandemic. Edwards said that while she’s unsure how employers will interpret coronavirus-related absences, millions of workers, particularly women, have already been forced to make career-altering sacrifices.

“In between ... are all of the women who have made concessions, who have pulled back, who have turned down jobs and turned down promotions, who have scaled back their work, who have earned less and gone part-time in order to accommodate child care,” she said.

“You don't have to pull back your labor force participation for this pandemic to have affected you as a worker,” she added.

While there is still significant uncertainty about how badly the delta surge could hinder the economy, economists and health experts largely agree that curbing the pandemic remains the best way to protect it.

More than 1.1 million doses of coronavirus vaccines were administered Friday, according to White House officials, the highest single-day total in nearly two months. But with no COVID-19 vaccines approved for children under 12, health experts have urged the Biden administration to step up its efforts to compel schools to impose stronger health safeguards.

“Not managing COVID means letting COVID manage us, and that's what's happening right now. It's just running rampant,” Raifman said.

“We all agreed that keeping kids in school was of paramount importance,” she continued. “Not having commonsense prevention policies like indoor mask mandates in place means that we get the worst of all worlds.”

A likely moderation in U.S. hiring in the monthly employment report on Friday will give policymakers a measure of the health of the labor market and the threat posed by the delta variant of the coronavirus. 

The U.S. probably added 750,000 jobs in August, a slowdown from June and July but well above the pace seen earlier this year, according to the median of economists’ forecasts. 

The pace of net hiring probably saw a moderate deceleration in August
 
 

The outcome will inform Federal Reserve officials gauging the economy as they look to wind down stimulus later this year. Fed Chair Jerome Powell, acknowledging that a taper in bond purchases may be warranted, said last week that the delta variant “remains a near-term risk,” though prospects toward maximum employment are good.

“The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the delta variant,” he said during a virtual speech at the Kansas City Fed’s annual Jackson Hole symposium. “We will be carefully assessing incoming data and the evolving risks.”

Powell Says Fed Could Start Tapering in 2021
Jerome Powell speaks at the Kansas City Fed’s annual Jackson Hole symposium
Source: Bloomberg

While job growth has been improving, labor-force participation -- the share of Americans either working or looking for work -- has been stuck near the lowest level since the 1970s for nearly a year.

Forecasters had expected that high vaccination rates and the reopening of schools would help bring workers back into the labor force this fall, but the rapidly spreading delta variant could shift that outlook as health concerns grow and some schools delay in-person instruction.

Ahead of the jobs report, private payrolls data from the ADP Research Institute on Wednesday could give an indication of the pace of hiring. The week will also bring data on pending home sales and manufacturing.

What Bloomberg Economics Says:

“Provided job growth looks strong enough, Fed officials may discount growing signs of weaker third-quarter momentum -- particularly on the consumer spending side. That puts emphasis on the August ISM manufacturing index and vehicle sales, consumer confidence, and the ISM services index to flesh out whether it is supply-side problems holding back growth or more worrying demand-side troubles.”

--Andrew Husby and Eliza Winger. 

Elsewhere, a likely spike in euro-zone inflation, gross domestic product reports in Canada, Australia, and India, and a possible interest-rate increase in Chile will all feature among the other big economic reports in the next few days.


Asia

The latest products and retail sales figures from Japan will show how the economy was faring in July as a resurgence in virus cases to record levels piled pressure on policymakers to restart and extend a state of emergency. Bank of Japan Deputy Governor Masazumi Wakatabe and board member Goushi Kataoka will give their takes on the economic and policy outlook following Powell’s Jackson Hole speech. 

Trade figures from South Korea could give further backing to the Bank of Korea’s view that the economy has enough strength to withstand higher rates and the latest wave of Covid-19. 

Australia and India publish economic output data this week
 
 

GDP figures from Australia will give a snapshot of the strength of the economy before the onset of extended lockdowns. 

China’s purchasing managers indexes will be closely watched on Tuesday amid signs the recovery there is losing steam, while reports from across the region on Wednesday will show how the spreading delta variant and supply chain snarls are affecting sentiment. 

India’s second-quarter GDP numbers are set to surge from a year earlier when Covid lockdowns slammed the brakes on the economy.


Europe, Middle East, Africa

The eurozone saw its fastest inflation since 2012 this month with a reading of 2.7%, according to the median forecast of economists, as supply bottlenecks and loosened lockdowns stoked prices. Meanwhile, the strengthening recovery is likely to have pushed unemployment to a full percentage point below its crisis peak of 8.6% seen last year. 

Those statistics on Tuesday and Wednesday will focus the minds of European Central Bank policymakers who are trying to assess the quality of the rebound from the pandemic and the sustainability of inflation, as they prepare for a significant monetary decision the following Thursday on whether to keep up an elevated pace of stimulus

With the coming days marking the final moment for officials to share their views before a pre-meeting quiet period, investors may pay closer attention to such comments not least in the aftermath of Powell’s speech. The central bank governors of Germany, the Netherlands, and Austria are all due to make public appearances. 

Euro-area inflation probably accelerated to 2.7% in August
 
 

In Sweden, Riksbank’s Governor Stefan Ingves and Deputy Governor Martin Floden will address the state of monetary policy in the biggest Nordic economy in separate events. Denmark meanwhile may publish its budget proposal for 2022 along with new economic forecasts. 

Further afield, Turkey reports August inflation on Friday, an indicator that will be a key determinant of the next monetary policy decision on Sept. 23. President Recep Tayyip Erdogan has pledged slower price gains and lower interest rates, and the headline rate may decelerate after the government announced a tax cut on cars. 

On Tuesday, Uganda is expected to report that core inflation accelerated while remaining below the central bank’s medium-term target of 5%. The next day, Zambia’s central bank is expected to leave rates unchanged to aid the economy’s recovery, with inflation is forecast to slow after the kwacha’s world-beating streak helped bring down import costs.


Latin America

Starting off the week in Brazil, look for some slowing in the August reading of the country’s broadest measure of inflation, while national unemployment likely remains near record highs.

Heading Up

Chile's widely seen raising its key rate on Aug. 31 with more to follow

Source: Banco Central de Chile, BCdC Encuesta de Operadores Financieros; Bloomberg.

Note: August key rate=median forecast.


Chile on Tuesday unleashes its end-of-month data torrent -- industrial output, copper production, unemployment, retail sales, and manufacturing -- ahead of the central bank’s monthly meeting. A rapidly heating economy and over-target inflation have analysts expecting at least a quarter-point increase here to push the key rate up to 1%. 

In Mexico, the central bank’s quarterly inflation report is keenly awaited, especially after the surprisingly dovish minutes of the bank’s Aug. 12 meeting appeared to put a rate pause on the table. 

Work in Progress

Brazil's GDP expected to jump from year ago, seen slowing from 1Q

Sources: Banco Central do Brasil; Instituto Brasileiro de Geografia e Estatística; Bloomberg.

Note: 2Q 2021 GDP figures=median estimate.

On Wednesday, Lima, Peru’s August consumer price report, Brazil monthly trade, and Chile’s GDP-proxy data bookend Brazil’s second-quarter output report, which should reveal some loss of momentum from the previous quarter even as the year-on-year result represents a record high.

Battle Renewed

Colombia's annual inflation rate is set to breach 4% top of target range

Sources: Departamento Administrativo Nacional de Estadistica; Bloomberg,

Note: August 2021 data=median estimates.

On Thursday, Brazil releases July industrial production data before Colombia then posts its August consumer price report, with analysts expecting inflation to have pushed above the target range to 4.2%.