Job Market Trends

The nation’s economy lost jobs last month for the first time since April, when the coronavirus (COVID-19) pandemic threw the economy into lockdown.

The Labor Department reports that nonfarm payrolls shrank by 140,000 in December. To find the main source of the damage, one needs to look no farther than the hospitality industry. These COVID-19-sensitive businesses -- particularly restaurants -- lost nearly a half-million jobs.

December marked the end to what had appeared to be a recovering job market. The economy began adding jobs in May and had restored more than 12 million jobs until last month.

Despite the setback, two numbers remained unchanged last month. The number of people who were out of work remained at 10.7 million, and the unemployment rate was unchanged at 6.7 percent.

In addition to the huge loss of jobs in the hospitality industry, private education shed 63,000 jobs and 45,000 government jobs disappeared.

Some industries added jobs

On the plus side, retailers added 121,000 jobs in December, even as more holiday sales moved to online channels. More than half the gain came at general merchandise stores and warehouses.

Employment in business and professional services grew by 161,000 last month, but a large number of those jobs were temporary in nature. Construction added 51,000 jobs in December, but employment in the industry is 226,000 below its February 2020 level, just before the pandemic.

Economists say the employment report shows there was a need for the coronavirus stimulus/aid bill Congress passed last month. It includes an extra $300 a week in unemployment benefits and a one-time $600 direct payment to every American.

President-elect Biden has served notice that more aid/stimulus will be coming in the weeks ahead now that Democrats control the White House and both chambers of Congress.

The economic toll from the coronavirus (COVID-19) continues to accelerate. The Labor Department reports that initial claims for unemployment benefits surged to 6.6 million for the week ending March 28.

That’s double the number who sought unemployment benefits during the previous week, as the virus began to force businesses to close and lay off employees. The previous week’s number had also been a record.

In fact, the government revised last week’s number upward by 24,000 workers. The Labor Department’s four-week moving average was 2,612,000, an increase of 1,607,750 from the previous week's revised average. The previous week's average was revised up by 6,000 from 998,250 to 1,004,250. 

Financial analysts on Wall Street were not surprised at the number, and it seemed to have no effect on stock futures when it was announced. Some analysts expect as many as 20 million Americans could lose their jobs as a direct result of the pandemic.

This week, an analysis from the St. Louis Federal Reserve Bank estimated that the nation’s unemployment rate -- which stood at 3.5 percent in February -- could reach 32 percent before the economy begins to recover.

Better benefits under new law

It may be small consolation to those who have lost jobs, but unemployment benefits have just gotten more generous. President Trump signed the CARES Act on March 27, increasing and extending jobless benefits.

In most states, employees laid off before December 31 can receive unemployment benefits for 39 weeks instead of the previous 26-week limit. The new law also waives the one-week waiting period that most states require.  

Those unemployment checks will also be bigger. The CARES Act adds $600 a week to workers’ benefits during the first four months of unemployment.

Finally, the law allows workers in the gig economy to file for unemployment benefits. Previously, these workers were not covered.

It was easier than expected to get hired last month. The Labor Department reports that the economy added 225,000 jobs in January, significantly more than expected.

Some of the biggest gains came in construction, health care, and transportation and warehousing. The unemployment rate ticked up to 3.6 percent because more people were looking for work.

Construction jobs increased by 17,000 after averaging 12,000 a month throughout 2019. Jobs in health care rose by 36,000, and transportation and warehousing jobs increased by 28,000.

The ADP National Employment Report, issued two days ahead of the government’s non-farm payrolls, showed where the new jobs are being created. Medium-size businesses with 50 to 499 employees created the most jobs in January -- 128,000. Small businesses, which traditionally have been the employment driver in the economy, produced only 94,000 jobs last month.

Gad Levanon, vice president of Labor Markets at The Conference Board, says the robust January jobs report is, in general, good news for people looking for a job.

“Amid stagnant growth in the working-age population, strong employment growth will likely further tighten the labor market in 2020,” Levanon said. “As a result, we can expect increasing challenges around recruitment and retention, higher labor cost growth, and a further squeeze on corporate profits.”

The advantage goes to employees and job seekers

A tight labor market might not be so good for employers, but it gives employees and job seekers additional leverage. The increase in jobs is drawing more people to the workforce, especially women. Levanon says the labor force participation rate for women aged 25-54 reached 77 percent in January. 

“That marks a near-record, just shy of the record rate in April 2000,” he said. “The improvement in labor force participation will partly offset the impact of strong job growth, slow further tightening in the labor market, and help fuel continued employment and economic growth.”

People with jobs earned more last month as well. Average hourly earnings for all employees on private nonfarm payrolls rose by seven cents to $28.44. On an annual basis, that’s a 3.1 percent increase in pay, slightly higher than the increase in December.

The record-long economic recovery has been marked by a strong demand for labor. The U.S. economy has added jobs for 112 straight months, the longest streak of job gains on record.