The recovery in the U.S. labor market came to a screeching halt in December as the economy unexpectedly shed 140,000 jobs to post the first decline in employment since April.
Restaurants and bars—high-contact industries particularly vulnerable in the pandemic—were by far the biggest drag.
- The U.S. shed 140,000 jobs in December, marking the first drop since April.
- Leisure and hospitality workers were hit hardest, with the sector losing nearly half a million jobs as stricter COVID-19 measures hurt restaurants and bars.
- Recovery hopes for later this year depend on two things: government stimulus and herd immunity to the coronavirus, economists said.
Monthly gains in nonfarm payrolls have been shrinking for months, and economists had expected a further deceleration in December, especially with stricter COVID-19 restrictions taking hold amid acute case levels. But many economists had still predicted some growth—a gain of 100,000 was the consensus forecast of economists polled by Moody’s Analytics—and instead payrolls declined by 140,000 to 142.6 million and the unemployment rate stayed at 6.7%, the Bureau of Labor Statistics (BLS) said Friday.
While U.S. unemployment is not nearly as dire as it was after the initial COVID-19 outbreak and lockdowns in March and April of last year, the recovery in the job market has been slowing as COVID-19 cases have surged around the country. The U.S. economy still has almost 10 million fewer jobs than it did before the pandemic and the unemployment rate remains nearly twice what it was in February. Everyone is waiting for vaccines against the COVID-19 virus to be widely distributed.
“Restrictions and voluntary efforts to curtail the spread of COVID took a clear toll on the labor market in December,” Sarah House, senior economist at Wells Fargo Securities, wrote in an online commentary. The next few months are likely to remain “bleak in the jobs market as the pandemic continues to rage.”
Winter weather has only exacerbated the problem for high-contact industries that had been relying more heavily on outdoor service. The leisure and hospitality sector, by far, led the decline with 498,000 jobs lost in December, the BLS report showed. Three-quarters of those were from restaurants and bars.
“The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID,” Diane Swonk, chief economist at Grant Thornton, wrote in an online commentary. “Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”
Despite the grim headline number, sectors including manufacturing, construction, professional/business services, and retail added jobs, a promising sign that it’s mostly industries affected by physical restrictions that remain the most vulnerable, economists said.
Besides the rollout of COVID-19 vaccines, economists expect government stimulus to help change the trajectory in 2021. The latest economic rescue package included $600 stimulus checks and a federal supplement to unemployment benefits, and President-elect Joe Biden has indicated he will push for additional government relief once he is in office.