The U.S. economy created the fewest jobs in seven months in August as hiring in the leisure and hospitality sector stalled amid a resurgence in COVID-19 infections, which weighed on-demand at restaurants and other food places.

The initial August payrolls print has undershot expectations and been slower than the three-month average job growth through July over the last several years, including in 2020. August payrolls have been subsequently revised higher in 11 of the last 12 years.

Employment in the leisure and hospitality sector was unchanged as restaurants and bars payrolls fell 42,000, offsetting a 36,000 gain in arts, entertainment, and recreation jobs. Retailers shed 29,000 jobs.

There were gains in professional and business services, transportation and warehousing, as well as manufacturing, which added 37,000 jobs. Factory hiring remains constrained by input shortages, especially semiconductors, which have depressed motor vehicle production and sales.

Raw material shortages have also made it harder for businesses to replenish inventories. Motor vehicle sales tumbled 10.7% in August, prompting economists at Goldman Sachs and JPMorgan to slash third-quarter GDP growth estimates to as low as a 3.5% annualized rate from as high as 8.25%.

Government payrolls fell in August as state government education lost 21,000 jobs. The Bureau of Labor Statistics, which compiles the employment report cautioned that "recent employment changes are challenging to interpret, as pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns."

U.S. stocks opened lower. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

HOUSEHOLD DETAILS STRONG

Details of the smaller household survey from which the unemployment rate is derived were fairly upbeat.

The unemployment rate fell to 5.2%, the lowest since March 2020 from 5.4% in July. It has, however, been understated by people misclassifying themselves as being "employed but absent from work." Without this problem, the jobless rate would have been 5.5%.

Though the participation rate was steady at 61.7%, about 190,000 people entered the labor force last month. Even more encouraging, the number of permanent job losers declined 443,000 to 2.5 million. The number of long-term unemployed dropped to 3.2 million from 3.4 million in the prior month. They accounted for 37.4% of the 8.4 million officially unemployed people, down from 39.3% in July. The duration of unemployment fell to 14.7 weeks from 15.2 weeks in July.

The employment report will be parsed by investors trying to gauge the timing of the Federal Reserve's announcement on when it will start scaling back its massive monthly bond-buying program. Fed Chair Jerome Powell last week affirmed the ongoing economic recovery, but offered no signal on when the U.S. central bank plans to cut its asset purchases beyond saying it could be "this year."

Some economists do not believe the below-expectations payrolls count is weak enough for the Fed to back away from its "this year" signal.

There were a record 10.1 million job openings at the end of June. Lack of affordable childcare, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.

There is cautious optimism that the labor pool will increase because of schools reopening and government-funded benefits expiring on Monday. But the Delta variant could delay the return to the labor force by some of the unemployed in the near term.

Retail giants Walmart (WMT) and Walgreens (WBAannounced wage hikes this week that will boost income for hundreds of thousands of U.S. employees — the latest sign that companies are responding to the pandemic labor shortage by coaxing people back to work with higher pay.

In a recent interview, Under Armour CEO Patrik Frisk attested to the hiring benefits of a wage increase.

Frisk, who raised the company's minimum wage to $15 per hour in May, said the move has helped Under Armour hire "more easily." Meanwhile, a simultaneous improvement to the company's benefits package has provided a "clear path" for potential careers with the company, he added.

The company experienced a major drop in sales last spring amid store closures in the early months of the pandemic, but quickly implemented a restructuring plan that helped it achieve earnings beats in recent quarters.

"Because we are doing better as a company, I felt together with the entire management team and the HR team that this was a moment in time where we could not just afford it but also it was just simply the right thing to do," he says. 

"Our recruitment also benefited from that, because we were able to recruit more easily," he adds. "But it wasn't the first reason why — it's something that we've been working on for two years."

"We also looked more comprehensively at all of our benefits," he says. "Now they have a clear path also in terms of a career with Under Armour."

The U.S. economy added 235,000 jobs in August, a dramatic slowdown in hiring from nearly 1 million jobs added the prior month, according to a report released by the Bureau of Labor Statistics (BLS) on Friday. The unemployment rate fell to 5.2%. 

Despite the sluggish job gains, hourly earnings for private-sector employees rose in August for the fifth straight month. A pandemic labor shortage may be driving the pay increases, the BLS report found.

"Rising demand for the labor associated with the recovery from the pandemic may have put upward pressure on wages," the report said.

Influencers with Andy Serwer: Patrik Frisk

In this episode of Influencers, Andy is joined by Under Armour President & CEO Patrik Frisk as they discuss new challenges for the retail industry, big changes for college athletics, and how raising the wage floor is affecting Under Armour's business overall.

The U.S. minimum wage stands at $7.25 — a level it reached after Congress imposed its most recent rate hike in 2009. A slew of states has passed laws that incrementally raise their minimum wage to $15, including New York, California, and Florida.

Liberal Democrats in Congress have sought to raise the national minimum wage to $15 per hour but have faced opposition from some moderate Democrats and many Republicans.

The hike to $15 per hour at Under Armour amounted to a 50% increase from its prior minimum rate of $10 per hour. The move raised to pay for more than 8,000 employees, who make up 90% of the company's warehouse and retail staff, the company said.

"It was a big move," Frisks says. "And very unexpected. It changed lives."

"When I'm out there, I'm talking to these young people very often," he adds. "They now had an opportunity to go from maybe two or three jobs to one job, they were now may be able to get a car, lease payments, and then it can actually get to work right, which is tremendously important to them."

FILE - This May 7, 2020, file photo shows a man wearing a mask while walking under a Now Hiring sign at a CVS Pharmacy during the coronavirus outbreak in San Francisco.  On Thursday, Nov. 12, the number of people seeking unemployment benefits fell last week to 709,000, the fourth straight drop and a sign that the job market is slowly healing. The figures coincide with a sharp resurgence in confirmed viral infections to an all-time high above 120,000 a day.  (AP Photo/Jeff Chiu, File)
FILE - A man wearing a mask while walking under a Now Hiring sign at a CVS Pharmacy during the coronavirus outbreak in San Francisco. (AP Photo/Jeff Chiu, File)

Frisk took over as Under Armour CEO at the outset of 2020, after the company's founder and then-CEO Kevin Plank stepped down to become executive chairman. Born in Sweden, Frisk has held numerous senior executive positions across the retail sector, including a decade at the Aldo Group, a global chain of shoe and accessory stores.

Speaking to Yahoo Finance, Frisk hailed the wage hike as a major shift from the company's typically slower approach to pay increases.

"We finally decided to stop being incremental and take the final step and make it all in one big go," he says.

"It's probably one of the proudest moments in my management career," he says.