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Real Time Economics
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U.S. employers shed 140,000 jobs and the unemployment rate held steady at 6.7% in December. Jeff Sparshott, Greg Ip and Eric Morath here to take you through the Labor Department’s latest employment report.
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Dipping, but Not a Double Dip
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Though employment declined for the first time since April, the economy is probably not slipping back into recession. The drop was induced by new restrictions on activity as the pandemic raged out of control. Leisure and hospitality, which includes restaurants, hotels, and amusement parks, tumbled 498,000. Restrictions in California alone may have cost roughly 700,000 jobs, Aneta Markowska of Jefferies estimates. Meanwhile, those sectors most sensitive to the state of the business cycle actually grew: construction rose 51,000, manufacturing 38,000 and retail trade 121,000. Temporary layoffs rose 277,000 while permanent layoffs fell 348,000, a reversal of the recent pattern. All this points to improving underlying conditions. With the virus still out of control and more virulent strains spreading, lockdown-related job and income losses could worsen yet. But Congress’ passage of
enhanced unemployment benefits and stimulus checks should keep those losses from feeding back more broadly to demand. —Greg Ip
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U.S. employers shed a net 9.37 million jobs from payrolls in 2020, making it by far the worst year for job losses on records back to 1939, according to Labor Department data. The economy lost 22 million jobs in March and April and could only partially make up that ground the rest of the year. Prior to last year, the worst annual decline occurred in 2009, when 5.05 million jobs were shed. That was on the heels of 3.55 million jobs lost in 2008. Last year marks only the seventh time in the past 80 years that more than 1 million jobs were lost. In 2019, employers added 2.13 million jobs. —Eric Morath
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December’s numbers were disappointing but the losses were concentrated in the leisure and hospitality sector. That suggests two things: Consumer caution and government restrictions related to Covid-19 are battering restaurants, bars, hotels, casinos and other businesses that pack people together. Until the pandemic is under control, those industries will struggle.
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Another segment of the economy that’s under pressure: State and local governments. Budget strains are forcing job cuts.
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Indeed economist Jed Kolko highlighted another pattern in December’s data: Job losses were concentrated in industries where people generally aren’t able to work from home. That’s more evidence that surging Covid-19 cases held back the labor market.
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The share of workers who teleworked rose last month, underscoring the flight from offices and other workplaces.
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The latest setback didn't fall evenly across racial and gender lines. Unemployment rates for Hispanic men and women rose sharply last month. The rates for Black men and women were the lowest since the pandemic struck, but remained elevated.
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One encouraging sign: The number of permanent job losers fell last month while the number of temporary layoffs rose, suggesting many of last month’s unemployed workers expect to be recalled.
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But long-term unemployment inched higher. The longer someone is without a job, the more difficult it can be to find a job.
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Demand a recount? Early in the pandemic, the Labor Department counted millions of workers as absent—something that usually applies to vacation or sick leave—when they probably should have been classified as unemployed. That subtracted as many as 5 percentage points from the headline unemployment rate. The Labor Department appeared to be whittling the problem down but it resurfaced last month, potentially lifting the “real” unemployment rate to 7.3%. The department advises, though, that number “represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.”
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The U.S. economy lost a net 2.82 million jobs during President Trump’s four years in office. Mr. Trump was poised to have a fairly strong record on job creation prior to March, when the coronavirus pandemic took hold and erased 22 million jobs in two months. The pandemic, combined with only serving a single term, means Mr. Trump will be the first president to leave office with fewer jobs than when he started since the Great Depression. Modern employment data dates back to 1939. The economy added 10.37 million jobs during President Obama’s final four full years in office, a marked improvement from a gain of 233,000 in his first term from 2009 through 2012. Employers shed 85,000 jobs during President George W. Bush’s first four years in office, but that was offset by a gain of 2.22 million in his final four years. The change in employment by presidential term is calculated
by comparing the level of seasonally adjusted nonfarm payrolls in the last full month of the term to the level in the last full month before the term began. —Eric Morath
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What Economists Are Saying
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"Today's report is a harsh reminder that the pandemic controls our economic trajectory. Though the end-of-year relief bill offered temporary reprieve and the start of vaccine distribution offers light at the end of the tunnel, we’re not out of the woods yet." —Daniel Zhao, Glassdoor
"Widespread distribution of vaccines is needed to allow for a more complete reopening of the economy and a recovery in the labor market. Until then, fiscal support will provide a safety net for households and businesses." —Rubeela Farooqi, High Frequency Economics
"These numbers are distressing, but they are reflective of the time when coronavirus vaccines were not rolled out and federal fiscal policy was still deadlocked. Hopefully the recent legislation can help build a bridge to a time when vaccines are fully rolled out and the labor market can sustainably heal." —Nick Bunker, Indeed
"The worsening heath situation and the fact that herd immunity is still months away mean that jobs growth will be tepid in the immediate months ahead." —Lydia Boussour, Oxford Economics
"The 140,000 drop in non-farm payrolls was entirely due to a massive plunge in leisure and hospitality employment, as bars and restaurants across the country have been forced to close in response to the surge in coronavirus infections. With employment in most other sectors rising strongly, the economy appears to be carrying more momentum into 2021 than we had thought." —Michael Pearce, Capital Economics
“When you shut things down, jobs disappear, it’s that simple.” —Joel Naroff, Naroff Economics
"The good news is that there is a clear light at the end of the tunnel and the potential for a very strong resurgence when the economy emerges on the other side; the bad news is until the spread of Covid-19 crests, the economy and labor market will remain vulnerable." —Jim Baird, Plante Moran Financial Advisors
"We expect this slowdown in labor market performance to be temporary and believe job growth will reaccelerate once this intense phase of the pandemic ebbs." —Roiana Reid, Berenberg Capital Markets
"The good news in today’s report is that outside the hopefully temporary hit to the food service industry, the rest of the labor market appears to be holding in despite the latest public health challenges." —Michael Feroli, JPMorgan Chase
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Real Time Economics offers a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.
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Real Time Economics comes to you from WSJ economics reporters and editors around the world. Today's issue was curated and edited by Jeff Sparshott (@jeffsparshott) in Manila, and Greg Ip (@greg_ip) and Chris Wellisz (@wellisz) in Washington, D.C.
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