With employment increasing by less than 250,000 last month and other incoming data disappointing, the recovery appears to be losing momentum even faster than our already-below consensus forecasts imply. The slowdown initially reflected the fading of the fiscal stimulus, ongoing supply shortages and the detrimental impact that the related surge in prices has had on households’ purchasing power. But the weakness in employment suggests that the Delta variant is now weighing on domestic demand, while its spread across South-East Asia, and the resulting factory closures, means that supply shortages could get even worse too.