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U.S. Loses Jobs in December as Pandemic Worsens

U.S. Loses Jobs in December as Pandemic Worsens

Job losses returned to the U.S. employment market as the infection rate of the COVID-19 pandemic increased across the country.

U.S. employers cut a net 140,000 jobs from payrolls in December, according to the Bureau of Labor Statistics (BLS). While many economists expected a slowing in job growth, to about 50,000 to 70,000 jobs gained for the month, the net decrease in jobs was the first since the initial months of the pandemic in March and April. Renewed restrictions affected the hospitality and personal services sectors the most, as well as schools and universities.

Despite upward revisions to employment gains in October and November, which added 135,000 jobs to the combined 855,000 previously reported two-month gain, the economic recovery has certainly stalled out. The expiration of federal aid programs at the end of the year undoubtedly exacerbated the economic circumstances of many, and recently-passed legislation will take time to boost the situation.

The U3 or “headline” unemployment rate was unchanged at 6.7% in December, the first month with no decline in the rate since the recovery began. The lack of change in the unemployment rate can be attributed to a similar stalling of the civilian labor force (CLF), which was virtually the same as last month at 160.6 million. Likewise, both the labor force participation rate (61.5%) and the employment-population ratio (57.4%) were the same as in November.

In other December BLS data, annual hourly earnings growth for all employees was 5.1%, a sharp jump from the 3% increase in December 2019 as the loss of lower-wage hospitality workers skewed the reported increase this month. The monthly wage figure increased $0.23 between November and December, and was up $1.44 from December 2019, to $29.81. The monthly wage increase for December was similar to that seen in April when the pandemic shut down mostly service-related employment, but on a lower scale.

As mentioned, the CLF was almost unchanged in December, as was the participation rate for both men and women, however, the employment-population ratio for men ticked up slightly by 20 bps to 65.3%, while for women it was the same as November. Women were disproportionately impacted by job loss, with their unemployment rate increasing by 10 bps to 6.3%, compared to an easing of 20 bps to 6.4% for men.

The total number of unemployed (10.74 million) is about the same as November, but more than five million greater than last December (in the household survey). The number of people not in the labor force who currently want a job has increased by 200,000 from November to 7.3 million currently.

The number of unemployed workers on temporary layoff increased by 277,000 in December to about 3 million, but the number of permanent job losers decreased by 348,000, to about 3.4 million. Workers that left jobs to look for another opportunity increased slightly to 743,000 in December, despite the weak short-term employment outlook. The number of employed part-time workers for economic reasons was down by almost half a million as restaurants and bars cut back again. The number of part-time workers for noneconomic reasons (in other words, they usually work part-time) also decreased in December to 18.2 million.

The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, fell by 30 bps from 12% in November to 11.7% in December. Persons marginally attached to the labor force increased to 2.2 million in December from 2.1 million last month. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.

The number of unemployed for less than five weeks shot up from the previous month by about 550,000 to 2.9 million. The 5 to 14 weeks category decreased by 182,000 and the 15 to 26 weeks category decreased by 300,000 to 1.6 million. The longer-term category of unemployed workers (out of work for 27 weeks or more) was little changed at 3.9 million workers.

Industry Focus

The net decrease in employment for December of 140,000 jobs was concentrated in the industries and sectors affected by increased restrictions and closures as the pandemic infection rate increased. The Leisure and Hospitality industry was hardest hit with a loss of 498,000 workers in December, but the Other Services and Government sectors lost a significant amount as well. Notable job gains continued in industries that are amenable to work from home situations, such as Professional and Business Services and Financial Activities. Retail trade also had a significant gain in December due to seasonal demand.

• Seasonal hiring boosted retail trade employment by 120,500, almost two-thirds of the gain in the Trade, Transportation and Utilities industry. More than half of that was in the general merchandise stores subsector (58,700). The transportation and warehousing sector gained 46,400 jobs in December as couriers and messengers hiring accounted for 37,400 jobs. Wholesale trade added a respectable 25,100 jobs in December as well.

• Although an additional 161,000 jobs were added in the Professional and Business Services industry in December, 88,400 of them were in the lower-paying employment services subsector. However, 52,500 jobs were gained in the higher-paying professional and technical services subsector, particularly in computer systems design and related services (+20,300).

• Construction hiring was strong in December, adding 51,000 jobs to worksites and payrolls. Specialty trade contractor employment grew by 32,100 jobs, with residential contractors adding 13,800 jobs and nonresidential contractors adding 18,300. The construction of buildings sector added 4,600 jobs, while heavy and civil engineering construction added 15,000 jobs in December.

• The Manufacturing industry gained 38,000 jobs in December, with 25,000 of them in durable goods manufacturing, primarily motor vehicles and parts (+6,700). Nondurable goods manufacturing gains (+13,000) were spread across several subsectors, more than cancelling a loss of 11,200 jobs in miscellaneous durable goods manufacturing.

• The Financial Activities industry (+12,000) spread monthly gains almost evenly between the finance and insurance (+6,900) and real estate and rental and leasing services (+4,900) sectors.

• The Mining and Logging industry gained 4,000 jobs in December, with the majority of it in oil and gas extraction (+2,300). The logging industry gained 1,300 jobs for the month as well.

• The Information industry cycled back to a mild loss of 1,000 jobs in December as losses in the motion picture and sound recording (-3,400) and telecommunications (-2,500) sectors were offset by gains in data processing (+2,600) and publishing (+3,400).

• The Other Services sector lost 22,000 jobs in December, with the largest share of it in the personal and laundry services (-12,400) subsector. Membership associations and organizations lost 8,500 jobs for the month.

• The Education and Health Services industry lost 31,000 jobs in December, but twice that were lost in the educational services sector alone (-62,500). The health care and social assistance sector added 32,000 jobs for the month, almost all of it in the hospitals subsector (+31,500) as the roll out of the COVID-19 vaccine began.

• The Government sector continues to lose jobs, with a drop of 45,000 workers in December. Although state government education lost 19,900 jobs for the month, local government employment excluding education accounted for the lion’s share, retrenching by 31,500 jobs in December.

• As previously mentioned, the Leisure and Hospitality industry returned to a near lockdown status, losing 498,000 jobs in December, with 372,000 of them in the food services and drinking places subsector. Another 102,600 employees lost jobs in the arts, entertainment, and recreation subsector, particularly amusements, gambling, and recreation (-91,900).