- Nonfarm payrolls fell by 140k in December, below market expectations for a 71k gain. The unemployment rate remained unchanged from November at 6.7%.
- Unsurprisingly, the biggest losses were in the leisure and hospitality (-498k), concentrated in bars and restaurants (-372k). Employment in the sector remains 23% lower than February levels. Jobs were also shed within private education (-63k), government (-45k) and other services (-22k), which includes businesses like hair salons.
- Many sectors continued to add jobs. Professional and business services increased by 161k, retail trade by 121k, construction by 51k, transportation and warehousing by 47k, and manufacturing by 38k.
- There wasn’t much movement in the household survey. The number of unemployed, and the labor force participation rate were both effectively unchanged. Of note, the number of people on temporary layoff rose 277k, as the return to restrictions shuttered many businesses.
- Another sign of increased restrictions was the share of people who teleworked, which rose again to 23.7% from 21.8% in November. A million more people also reported they did not work at all or worked fewer hours at some point in the last four weeks due to the pandemic.
Key Implications
- Hopefully, it is indeed darkest before the dawn. As Covid-19 infections continue to rise in many regions through early January, that dawn may not come until February for the job market. Once the vaccination rollout is farther along and hospitalizations have fallen, we expect employment pick up once again, buoyed further by the recent stimulus bill.
- Congress passed a $900 bn Covid-19 relief bill in late December, which extends the special emergency unemployment benefits for 11 weeks through to mid-March. In addition, the $600 relief checks and various other measures in the bill will go a long way to supporting growth in the first quarter as restrictions keep many businesses shuttered. This bill is larger than we assumed in our recent economic forecast, somewhat offset by a larger than expected drop off in activity at the end of the year. Now that the Biden administration has Congressional majorities, there is likely further fiscal assistance on the way. Both of these factors present upside risk to our forecast, and may lead to a faster decline in the unemployment rate than expected in December, once the virus is brought under control.
