The December Numbers Had been Terrible, however the Economic system Has a Clear Path to Well being
It seemed reasonable that the employment numbers for the final months of 2020 would be as bad as the year as a whole.
It is fair to say that the loss of 140,000 jobs in December signals a relapse in the economic recovery in the summer and fall. Other figures in Friday’s report confirm this generally gloomy picture, such as the persistently depressed proportion of employed adults. In the debate about which letter of the alphabet best describes the pattern of the 2020 economy, the December numbers virtually rule out “V”.
The details of this report along with everything else that is swirling around in economic policy and the financial markets are more optimistic. Thanks to monetary and fiscal incentives, there is an opportunity for 2021 to be the year of a remarkable upturn. the delayed effects of buoyant markets in recent months; and most importantly, the prospect of widespread coronavirus vaccination.
December’s numbers suggest an employment crisis limited to sectors dealing with the direct effects of pandemic stalemates. Contrary to the spring 2020 data, the latest numbers do not coincide with the widespread lack of demand in the economy that has made the recovery from recent recessions so long and so slow.
The largest job loss in December was in the leisure and hospitality industry, a sector that lost 498,000 jobs. Think about what that number represents: myriad restaurants, hotels, performance stages, and arenas that are closed; and hundreds of thousands of people are unemployed again and unsure when to return to work.
The good news is we know how and when these jobs can return. If enough Americans are vaccinated, they will likely feel comfortable returning to normal patterns of pastime. A real boom in these sectors is plausible later this year. American savings are going through the roof, and it is easy to imagine the demand for travel, concerts and the like being pent up.
Other sectors less directly affected by public health concerns – industries that were at a recessive level just a few months ago – continued to improve. You are not necessarily back to pre-pandemic levels, but are on track to get there for much longer.
Employment in construction is still 3 percent below pre-pandemic levels, but the sector created 51,000 jobs in December. At this rate it will get well again in spring. The situation is similar with production orders, which are still 4 percent lower than in February, but created 38,000 jobs in December.
The list of sectors that follow this basic pattern – still at a recession-compatible level but steadily retreating – is long and encompasses industries as diverse as trucking, property rental and leasing, and professional and business Services.
Jan. 8, 2021, 8:36 p.m. ET
Both politics and the market environment should create tailwinds for these sectors in 2021 and help them return to full health faster.
A booming stock market doesn’t lead to more economic activity overnight. As corporate executives create their investment plans and consumers make their spending decisions, rising stocks tend to have a positive effect. This would mean the positive impact of new market highs in the past few weeks should show as public health concerns subside.
December employment numbers cover a period before Congress reached a compromise pandemic relief package worth $ 900 billion. The bill includes improved unemployment benefits, among other things, that will help hundreds of thousands of workers whose jobs went missing in December, as well as $ 600 checks that are set to boost consumer spending in the coming months.
Additionally, Georgia’s Democratic victories this week and the resulting Senate majority make it more likely that these checks will soar to $ 2,000 per person. It also means that the Biden government will have the flexibility to set a more ambitious agenda, including infrastructure spending, that should support macroeconomic activity.
A Democratic Congress is also likely to provide more aid to states, helping one of the other areas of job loss in December along with leisure and hospitality (state and local governments cut 51,000 jobs in the last month).
A lot could still go wrong, such as a prolonged mistake in the vaccine launch or a market correction that damages business and consumer confidence. And none of this relieves the pain of the millions of Americans who are still unemployed.
But all together and more than ever since the pandemic began, the economy has a clear path back to full health.