Total payroll employment rose a statistically insignificant 49,000 in January and was revised down for the months of November and December. Private sector payrolls added only 6,000 jobs, which is virtually flat. January is typically the worst month of the year for seasonal layoffs as workers in the retail and leisure and hospitality sectors tend to be particularly hard hit. We did not hire up during this past holiday season, which means we should have seen much smaller seasonal layoffs, which in turn means the seasonally adjusted payrolls data should have surprised to the upside instead of being flat. We lost more than 2.7 million jobs in January, before the seasonal adjustment.
Public and private education added jobs after seasonal adjustment as some schools reopened. Seasonally adjusted gains were driven by an increase in professional services, most of which were in temporary hires. That marked a sharp reversal of the permanent hires we saw prior to the pandemic and reflects the ongoing uncertainty about the path of the recovery going forward.
The Bureau of Labor Statistics (BLS) revised data for the past year. Total establishment job losses were greater during the onset of the crisis in March than previously thought. We lost 1.7 million jobs in March, before lockdowns took effect across the country. That data was initially reported at a loss of about 700,000. We are now 9.9 million jobs in the hole from the peak in February. That compares with the 8.8 million jobs we lost during the worst of the recession in 2008-09 and does not include the self-employed.
Seasonal layoffs were surprisingly large among online retail, couriers and messengers, which had been on an upswing prior to the holiday season. We continued to shed jobs in nursing homes as many people have pulled their loved ones out of long-term care facilities to reduce their chances of getting COVID.
Average hourly earnings increased 0.2%, smaller than many expected, but the year-on-year gain in earnings reached 5.4%. That does not mean that wages rose. It means that more highly paid workers retained their jobs than low-paid workers over the year. Weekly hours worked jumped to 35 hours, the highest level going back to the early 2000s. That suggests that employers used the workers they had to do more instead of hiring up to meet any increase in demand.
Separately, the unemployment rate fell to 6.3%, as participation in the labor force receded again. Some 4.3 million workers have left the labor force entirely since the onset of the crisis, either because of the poor prospects for employment or to care for children who are now learning online at home instead of in schools. Women make up nearly 60% of those workers. The BLS has also seen another rise in the number of workers who are saying they are absent from work due to COVID. Most of those workers are actually unemployed. The real unemployment rate is somewhere between 9 and 9.5% after adjusting for those shifts. That is down from the highs we saw last spring, but still disturbingly high.
The ranks of the long-term unemployed, those who have been unemployed for more than 27 months, continued to increase, expanding to nearly 40% of the total classified as unemployed. That is below the peak we hit coming out of the Great Recession in 2010, but still staggeringly high. Some workers have been out of work since the onset of the crisis last spring; others went back to work, only to be laid off again. After six months of unemployment, we tend to see the demoralizing effects of unemployment compound; mental and physical health suffer, family structure deteriorates, the well-being of children deteriorates; we tend to see a vicious cycle of unemployment as lost earnings take hold in the hardest hit communities.
The January employment report was bad when viewed in the context of jobs already lost and downward revisions to November and December. Holiday hires were nearly nonexistent, while holiday layoffs still occurred. We are losing ground as the virus mutates and vaccinations lag. The argument for more aid is unequivocal if we hope to recoup what we lost, let alone what could have been. Often lost in translation is that we are down more than 12 million jobs if you include the job gains we would have generated if the expansion had not been disrupted. This doesn’t mean we will not see another big rebound in employment growth this spring, but we can’t sustain gains unless we can reach herd immunity without glitches by early fall.
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