January Job Growth Barely Moves the Needle
The U.S. economy added just 49,000 jobs in January, barely moving the needle on the labor market recovery but meeting economists’ low expectations amid a relentless pandemic.
The tiny addition increased total nonfarm payrolls to 142.6 million, and the unemployment rate fell to 6.3% from 6.7% in December, the Bureau of Labor Statistics (BLS) said Friday. Gains in business and education were offset by losses in restaurants, bars, hotels and the retail sector.
A tough winter of surging COVID-19 cases and tighter restrictions stalled an already tenuous recovery in the job market, with December marking the first net loss in jobs in eight months.
While January didn’t entail another net loss, the slight increase is little progress, particularly since November and December numbers were adjusted lower by the BLS Friday, showing 159,000 more jobs were lost in those two months than previously reported. There are still almost 10 million fewer jobs now than before the pandemic, and the unemployment rate remains higher than the 3.5% seen before the pandemic took hold. All eyes these days are on how quickly COVID-19 vaccines can achieve herd immunity.
“As the economy passed the worst of the third Covid wave, and vaccine optimism took hold, the labor market displayed a faint heartbeat,” economists at Oxford Economics, a U.K.-based research firm, wrote in reaction.
The median estimate of economists polled in multiple surveys was an increase of 50,000 nonfarm payrolls, though Moody’s Analytics had expected a 275,000 increase.
The BLS updated the increase in November payrolls to 264,000, down from 336,000 and said the December loss in jobs was actually 227,000 rather than 140,000.
The paltry gain in January payrolls is even more dismal when considering that it should have benefitted from the weak seasonal hiring in December. Bars, restaurants, and retail normally hire temporary workers for the holiday rush but since there was a spike in COVID-19 cases, many states had tighter restrictions in place, closing restaurants for indoor dining and limiting the number of shoppers in stores at one time.
In December, the retail industry hired a seasonally-adjusted 15.3 million people, the smallest holiday hiring since 2012, while food and drinks establishments hired almost 10 million, the lowest since 2011.
Instead, the leisure and hospitality sector remains the bleakest segment. With another 61,000 jobs lost in January on top of the 536,000 decline in December, that group now accounts for almost 40% of all layoffs since February. In retail, 38,000 jobs were lost versus an addition of 135,000 in December. Jobs in retail are still 383,000 lower than they were in February.
Further, the breadth of job losses in January also surprised economists. Overall, the number of industries that added jobs last month fell to the lowest level since April, Sarah House, senior economist at Wells Fargo, wrote in a commentary on Friday.
The typically strong nonstore, or online, retailers shed 14,800 jobs and warehousing and transportation dropped 27,800 positions, while manufacturing cut 10,000 workers.
One bright note was employment in professional and business services, which rose by 97,000, though some 83% of those were for temporary help services. Since February, however, employment in professional and business services is still down by 825,000.
Looking ahead, economists expect widespread COVID-19 vaccine rollouts to allow more businesses to reopen, which should boost jobs. However, economists still think it will take years before employment returns to pre-pandemic levels.
Sophia Koropeckyj, managing director for Moody's Analytics, wrote in a note that she expects that to happen in 2023, a year earlier than what the Congressional Budget Office predicted earlier this week.