WASHINGTON (Reuters) – The US economy lost jobs for the first time in eight months in December as the country succumbed to an onslaught of COVID-19 infections, suggesting a significant loss of momentum that could temporarily disrupt recovery from the pandemic.
The collapse in non-farm payrolls reported on Friday by the Department of Labor focused on the coronavirus-sensitive leisure and hospitality sector, which lost nearly half a million jobs. But with other sectors, including retail, manufacturing and construction performing better, the economy is unlikely to go back into recession.
Nearly $ 900 billion in government-approved pandemic aid in late December is likely to provide support. Further fiscal stimulus is expected now that Democrats have gained effective control of the US Senate, raising the prospects for President-elect Joe Biden’s legislative agenda. There is also optimism that the launch of coronavirus vaccines will be better coordinated under the upcoming Biden administration.
Congress officially certified Biden’s victory in the November 3 election on Thursday, hours after hundreds of supporters of President Donald Trump stormed the United States Capitol. The employment report is one of the final scorecards delivered during the Trump presidency and stands as a reminder of the tumultuous economic crisis that marked his final months in office.
“This is a pause in the recovery, not a complete stalemate,” said Chris Low, chief economist at FHN Financial in New York.
Wages fell 140,000 jobs last month, the first decline since April, after rising 336,000 in November. The economy made up 12.4 million of the 22.2 million jobs lost during the pandemic. Economists interviewed by Reuters had predicted that 77,000 jobs would be added in December.
According to a Reuters analysis, COVID-19 cases in the United States have jumped to more than 21 million, with a death toll exceeding 357,000.
The leisure and hospitality sector lost 498,000 jobs last month, with employment in bars and restaurants plummeting by 372,000, or three-quarters of the decline. Restaurants and bars in many states, including New York and California, were closed over the holidays to slow the spread of the virus. Excluding the leisure and hospitality sector, payrolls increased at roughly the same pace as in November.
There have also been decreases in private education jobs as many universities and colleges closed after Thanksgiving. State employment declined for the fourth straight month, with losses spread across state and local governments.
But retail employment increased by 121,000 jobs. Factories hired 38,000 workers and construction payrolls increased by 51,000 jobs. Employment was also increased in the professional and business services, transport and warehousing, health care and wholesale sectors.
Weak payrolls combined with weak consumer confidence and spending to underscore the brutal impact of the coronavirus on the economy, which plunged into recession in February. The data raises the likelihood of another bailout package by March.
Wall Street shares were trading mostly higher in hopes of more government money. The dollar rose against a basket of currencies. US Treasury prices have been trading mostly on the downside.
SOME SILVER LININGS
With the virus hollowing out lower-wage industries, average hourly earnings increased 0.8% after gaining 0.3% in November. The average work week fell to 34.7 hours from 34.8 in November.
Although the unemployment rate remained unchanged at 6.7% in December, this was due to people who misclassified themselves as “employed but absent. from work. “Without this misclassification, the unemployment rate would have been around 7.3%.
Despite last month’s job loss, the job market is steadily improving. A broader measure of unemployment, which includes people who want to work but have stopped looking and those who work part-time because they can’t find full-time employment, fell to 11.7% from 12.0% in November.
The number of people who have permanently lost their jobs decreased from 348,000 to 3,370 million. This was the biggest decline since December 2010. However, it will likely take years for the scars from the pandemic to heal. Nearly 4 million Americans were unemployed for more than six weeks, representing 37.1% of the unemployed in December.
“These healing effects pose downside risks to the recovery and could lead to increased long-term unemployment and weakened labor market attachment for years to come,” said Lydia Boussour, senior US economist at Oxford Economics. in New York.
The labor force participation rate, or the percentage of working-age Americans who have a job or are looking for one, remains depressed at 61.5 percent. The employment / population ratio, understood as a measure of an economy’s ability to create jobs, remained at a low level of 57.4%.
Economists are optimistic that employment will pick up in the coming months and accelerate through 2021 amid expectations of increased vaccinations and further fiscal stimulus, including increased spending on infrastructure under the Biden administration.
“The savings are burning the pockets of many people after avoiding travel, in-person dining and entertainment for nearly a year,” said Sarah House, senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Hiring could rise rapidly once COVID cases are more under control.”
Many economists updated their growth estimates for 2021 following the recent aid package and two ballot elections in Georgia this week that gave Democrats effective control of the US Senate. Biden’s party retained control of the US House of Representatives in the November 3 election.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao