U.S. economy might lose jobs in December for first time since onset of pandemic

U.S. economy might lose jobs in December for first time since onset of pandemic

The U.S. economy ended 2020 on a sour note as the coronavirus pandemic exploded across the country and cost more people their jobs. How bad it got, we’re just about to find out.

Here’s what to watch in Friday’s employment report for December from the U.S. Labor Department.

How many new jobs?

Wall Street estimates the economy created 50,000 new jobs in December, but there’s not a whole lot of confidence in even that meager forecast.

For one thing, new jobless benefit claims shot up in December to the highest level in more than three months after a resurgence in coronavirus cases caused businesses to lay off more workers.

Read: Jobless claims still very high at the end of 2020

A pair of Institute of Supply Management surveys of senior executives at manufacturing and service-oriented companies, meanwhile, also showed employment was either soft or outright declined last month.

Then on Wednesday, large payroll processor ADP said the private sector lost jobs in December for the first time in eight months.

Even a 50,000 gain in new jobs, as forecast, wouldn’t be much to applaud. It would be the smallest increase since the economy began to recover from the coronavirus pandemic which first hit last spring, leaving the U.S. with some 10 million fewer jobs compared to just before the crisis.

Hiring will have to speed up a lot faster to undo most of the damage.

Unemployment rate

Don’t be fooled by the official 6.7% unemployment rate. It could move up or down a few ticks in December, but it’s almost certainly much higher than that.

How come? Some 4 million Americans who were working before the pandemic have dropped out of the labor force and are not counted in the official unemployment rate.

The jobless rate would be closer to 9.5% if all those people were still in the labor force, estimate Thomas Barkin, president of the Richmond Federal Reserve, in a virtual presentation on Thursday.

Whatever the case, the unemployment rate is unlikely to improve as rapidly as it did during the summer and fall until the latest COVID-19 outbreak starts to fade.

Companies are either reluctant to hire until they get a firmer sense of the direction of the economy — or workers are too afraid to go back to work with the coronavirus raging again.

Business shutdowns and restrictions

The biggest damage to the labor market last month, as ADP showed, was concentrated once again in businesses such as restaurants, hotels, theaters, retail stores and Main Street shops that deal directly with customers.

Many states reimposed restrictions on operating hours or the number of customers allowed on premises, forcing these businesses to lay off employees again or scale back their work schedules. So expect a decline in employment in leisure and hospitality industries in December.

Manufacturers, for their part, say their biggest problem is finding enough skilled labor even amidst a pandemic. Even if they wanted to hire a lot more people they can’t. That will also suppress hiring in December.

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