Payroll employment dropped by 140,000 in December following an upwardly revised gain of 336,000 in November. That leaves us nearly 10 million jobs in the hole from the peak in February with additional losses expected at the start of 2021. Job losses were dominated by a sharp plummet of 448,000 jobs in leisure and hospitality. The bulk of those job losses occurred in restaurants and bars, many of which closed their doors for good. The new relief package from Congress will help some to stay afloat with another round of PPP loans but that was signed into law less than two weeks ago. Private education also cut jobs as many schools that had reopened were forced to close when COVID cases surged after Thanksgiving.
Public sector employment lost 45,000 jobs in December. Further drops in state and local employment - largely education at the state level since universities went back online after Thanksgiving - more than offset a small gain in federal employment, including postal workers. There is funding for the U.S. Postal Service in the recent aid package, which should help boost employment and speed deliveries at the post office as we move into 2021.
Job gains were dominated by retail trade and professional services. The bulk of retail hires were in superstores and warehouse clubs, which hired up for the Christmas holiday. Professional job gains remained concentrated among temporary hires, which reflects uncertainty about the pace of the recovery in the wake of what is already the worst wave of infections.
Construction employment actually picked up during the month. Unseasonably mild winter weather and the ongoing push to remodel and build new homes were drivers of those gains; the supply of new homes for sale remains extremely low.
The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.
Average hourly earnings jumped 0.8% during the month, 5.1% from a year ago. That is the strongest since May but is more reflective of a loss in low-wage workers in leisure and hospitality than an actual improvement in wage gains. Hours worked fell slightly, largely due to a loss in hours worked in the retail and leisure and hospitality sectors.
Short-term layoffs related to COVID surged. The number of those laid off for less than five weeks jumped by 449,000, almost the same number who lost their jobs in leisure and hospitality.
The unemployment rate held at 6.7% in December. Participation in the labor market also remained unchanged at 61.5%. That is down from 63.3% in February before the crisis hit.
The number of long-term unemployed rose and now accounts for 37% of the total jobless. About 4 million people have left the labor force entirely since February; the majority were women who have taken up the responsibility of caring for children who have been forced to learn online instead of in schools. If we include those people in the number of unemployed , the unemployment rate is closer to 10%, which is a large improvement from the more than 20% rate hit during the height of the crisis in April, but still horrible.
Employment lost ground in December, but losses were largely concentrated in sectors hit hardest by COVID and renewed containment measures. Hopefully, many of those jobs will return once we hit herd immunity and can reopen the economy more fully. That is still a long way off, which underscores the need for aid today and another tranche once the new administration takes office. As we saw in 2020, the magnitude of the rebound in growth will depend heavily on our ability to repair and restore incomes for those hardest hit by the crisis.
Copyright © 2021 Diane Swonk – All rights reserved. The information provided herein is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic, financial, investment or any other decisions. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.