December 2020 Jobs Report: Restoration Goes Into Reverse

The already stuttering economic upswing was reversed last month when employers laid off their workers in increasing coronavirus cases and delayed government aid.

US employers cut 140,000 jobs in December, the Department of Labor said on Friday. It was the first net decline in payrolls since the mass layoffs last spring, and it was followed by five consecutive months in which hiring had slowed.

The report was a grim keystone for a year in which the economy lost more than nine million jobs, the worst percentage in World War II. It also means President Trump will be the first chief executive since Herbert Hoover to step down with a net loss of jobs, down from roughly three million by four years.

The unemployment rate remained unchanged at 6.7 percent and was thus well below the high of almost 15 percent in April, but still almost twice as high as the 3.5 percent rate in the same month last year.

The December losses were heavily focused on the leisure and hospitality sector, which cut nearly half a million jobs as the resurgent pandemic caused governors to close restaurants and families to cancel trips home for the holidays. Many forecasters expect these losses to continue into the new year.

“It’s really vivid evidence that the labor market cannot recover in a sustainable manner until the pandemic is under control,” said Nick Bunker, director of North American research for Indeed careers site.

Speaking at an event in Wilmington, Delaware, Friday, President-elect Joseph R. Biden Jr. said the report underscored the need for more federal aid to households and businesses, including another round of direct payments to most Americans.

“With the raging pandemic, people are losing jobs and hope,” he said. “The bottom line is that the job report shows that we now need to provide immediate assistance to working families and businesses.”

At the same time, economists said the concentrated job loss in December suggests that the damage from the recent wave of coronavirus cases has not spread to the rest of the economy. This can allow for a faster rebound if vaccinations become more widespread.

Most forecasters expect the economy to remain weak and potentially shedding more jobs in early 2021. However, they are becoming increasingly optimistic about the rest of the year. The $ 900 billion bailout package passed by Congress last month is likely to boost the economy, and more federal aid may be more likely after the Democrats take control of the Senate in Georgia this week’s elections. And since coronavirus vaccines are widespread, they should allow the return of the activity that was suppressed by the pandemic.

“There are lots of rich people who have saved a lot of money and really want to spend it,” said Tara Sinclair, an economist at George Washington University. “Will that be enough to make up for all the lost business? No, but it will look like a faster recovery. “

Industries less affected by the pandemic, such as manufacturers and construction companies, added more jobs in December. Retailers, who laid off millions of workers last spring, created more than 120,000 jobs in the past month, a sign that they have learned to adapt to the pandemic.

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And many of the recent job losses have been temporary vacation days that could be quickly reversed once the pandemic subsided. The rise in permanent job loss decreased in December.

“You never like a drop in employment in the economy,” said Richard Clarida, vice chairman of the Federal Reserve, in a webcast question-and-answer session Friday morning. That said, the job losses were really focused on retail and hospitality “and” it’s not surprising given the increase in new cases and hospitalizations. “

Robert Branca, who owns two dozen Dunkin locations in Massachusetts, said business picked up steadily over the summer but has since declined. A handful of his stores have permanently closed, as have some other restaurants he has partnered with. Others are on the verge.

“I have a few in the bubble who may not make it, especially since sales fell over the winter,” he said.

The course of the virus over the coming months will be critical, Branca said. But even more important is the introduction of the vaccine: once his employees and customers feel confident about being face-to-face with each other again, he expects business to pick up. Even then, it will take some time to complete the rebuilding after months of declining sales.

“If you don’t go out of your house today, you won’t buy two cups of coffee tomorrow,” he said. “You’ll never make it up to you.”

Mr. Branca welcomed the recent Congressional Aid Package, which provided direct aid to small businesses and put money in customers’ pockets. It also expanded unemployment benefits for millions of Americans who faced impending loss of income by the end of the year.

However, aid came too late to save thousands of small businesses or many families from permanent financial damage.

“Some of the damage has already been done,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “We need to focus on healing, not just recovering from this crisis, because the wounds are deep.”

Gwen Turos lost her job as a stage manager at the Oregon Shakespeare Festival in March and has not worked since. Her wife, who also worked for the festival, also lost her job.

Federal aid helped the couple to build up savings early on. But a $ 600 weekly jobless allowance from the federal government ended in July, and revitalization talks stalled in Congress for months. By the fall, the savings were gone, and Ms. Turos was diving into her retirement plans and selling things online to make ends meet.

The Congress aid package should help, but it will not undo the damage. Ms. Turos, 50, said she expected to postpone her retirement for at least four or five years. And that assumes that the help does not run dry before the live performances can start again.

“It’s hard to figure out how to build a bridge from point A to point B if you don’t know how far to go,” she said.

Federal aid can also be crucial in another badly affected category: the public sector. State and local governments cut more than 50,000 jobs in December and lost 1.4 million since February. Mr. Biden is expected to make assisting state and local governments a priority as he takes office.

The December data highlighted the deep inequality that was a defining feature of the economic crisis. The low-wage workers who shouldered the brunt of job losses in the spring – many of them black and Hispanic women – did so again in December. Employment rose for men last month but fell for women, particularly black women and Latin Americans. The unemployment rate among Hispanics rose to 9.3 percent from 8.4 percent in November.

Almost four million Americans have been unemployed for more than six months, the standard long-term unemployment threshold. That number almost certainly underestimates the problem, as it excludes most people who are not looking for work, whether because they don’t believe that jobs are available or because they are caring for children or other family members.

Long-term unemployment was a hallmark of the last recession a decade ago, when millions eventually gave up looking for work, sometimes permanently. If this pattern repeats itself, it can have long-term consequences, especially for people with disabilities, criminal records, or other traits that make it difficult to find work even in the best of times.

“These are the types of workers that are really only hired and hired in a very tight job market and it can be a long time to get back there,” said Julia Pollak, employment economist at ZipRecruiter. “That’s the concern – that there are these groups of people who are getting out now and only find really good opportunities again after sustained and protracted expansion.”

Jeanna Smialek contributed to the reporting.

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