When the Los Angeles Regional Food Bank was distributing groceries outside a church in Los Angeles on November 19, 2020.
Mike Blake | Reuters
Almost half a million jobs were lost in December in restaurants, casinos and other businesses, which have been hardest hit by the spreading pandemic. However, strong job growth in other areas shows encouraging resilience in the labor market.
The decline in non-agricultural employment from 140,000 in December was well below the 50,000 increase expected by economists. The unemployment rate was unchanged at 6.7%, as was the number of unemployed at 10.7 million.
“It’s a Covid job report that has a heavy focus on restaurants and bars as well as education,” said Diane Swonk, chief economist at Grant Thornton. “The schools that opened had to close again and the universities went online.”
The job report comes when the U.S. death toll from Covid-19 hit a record 4,000 in one day. According to economists, December’s negative employment report, the first drop in eight months, underscores the importance of speeding up vaccinations and containing the spreading virus so businesses can recover. There could also be a decline in jobs in January.
The December job losses were greatest in food and drink opportunities, affecting 372,000 workers. Employment in casinos and other recreational areas fell by 92,000. Hotels and lodging fell by 24,000. Overall, the leisure and hospitality industry has lost 3.9 million jobs, or 23.2%, since February.
In December, education payrolls fell 63,000 and government jobs fell 45,000.
“Besides that, the job market has shown very good resilience. That’s the silver lining,” said Michael Gapen, Barclays’ chief US economist. “To me, this certainly means that these jobs should return if we gain control of the pandemic through increased vaccinations.”
Economists said the latest stimulus package, with unemployment benefits and checks for individuals, should help the economy, and the paycheck protection program funds should help small businesses. The next aid package is expected to be approved quickly after President-elect Joe Biden was sworn in on Jan. 20.
“We are currently assuming that we will go through weaker phases in December, January and probably still in February,” said Jan Hatzius, chief economist at Goldman Sachs in the USA, at CNBC. “But when we get into spring we expect a very strong recovery.” He said the economy should be supported by better virus news, vaccinations and more fiscal incentives.
Hatzius said he expects $ 750 billion in additional relief on top of the last $ 900 billion.
“This was a revival in Covid cases, and not a weaker demand that brought us further down,” Swonk said. “I’m concerned that many restaurants and bars may have closed permanently before the incentive hit them.”
Swonk said the economy is losing momentum but combating the virus’ impact is like a marathon and the economy should strengthen if controlled. “We have to cover the toughest mile that lies ahead of us,” she said.
One of the positive results in the job report was an increase in the employment of specialist and business service providers by 161,000, even though 68,000 employed temporary workers. Retail sales grew 121,000, half of which in general merchandise stores such as warehouse clubs and big box discounters. Manufacturing added 38,000 jobs and construction rose 51,000.
In October and November 135,000 jobs were revised upwards.
Luke Tilley, chief economist at Wilmington Trust, said one of the big problems is deeper scarring of the economy from persistent unemployment. “If most jobs are lost to Covid, once Covid gets under control you will get fewer scars. The permanent scars would come from two different places. There’s the very familiar story of people being unemployed for a long time, that loses its skills. The other part of the story is when companies have learned to work with fewer people, “he said.
Tilley said it was positive that the number of people viewing themselves as permanently unemployed has fallen sharply. That number fell by 500,000 to 4.2 million and there was an increase of 277,000 people who considered themselves temporarily unemployed. This is the first increase since spring, he added.