America’s job market recovery ground to a halt in December, making President-elect Joe Biden’s task to repair the economy that much harder.
The US economy shed a staggering 140,000 jobs last month, the Bureau of Labor Statistics reported Friday — a far worse outcome than economists predicted.
The unemployment rate remained flat at 6.7%, marking the first time the rate hasn’t improved in seven months.
The jobless rates for Hispanic workers, teenagers and women rose in December.
The increase in Covid-19 infections, as well as the virus-containment measures states have had to take, are at the root of the worsening labor market conditions, the BLS said, ending a bleak year for workers on a sour note.
The leisure and hospitality industry — which was hit hardest by the pandemic because of the face-to-face nature of the business — lost nearly half a million jobs in December, most of them in restaurants and bars. The industry has shed 3.9 million jobs, or 23.2%, since before the pandemic.
However, the concentrated nature of the job losses means that the recovery in other areas of the economy is still going, said Sal Guatieri, senior economist at BMO, in a note to clients. Retail trade, for example, added 121,000 jobs in December.
“I think there is a case for cautious optimism,” said Glassdoor’s Senior Economist Daniel Zhao. “If losses are mostly contained to temporary layoffs, then targeted aid might be able to bridge the gap until there’s mass vaccination.”
All of this means Biden has his work cut out for him when he enters office later this month.
Washington has more work to do
The US economy is far from its pre-pandemic strength and is still down 9.8 million jobs since February.
It took the labor market more than five years to recover from the job losses of the 2008 financial crisis, which were less severe.
While the stimulus package that was signed into law in the final week of 2020 extends pandemic-specific benefits and re-expands unemployment aid by $300 per week until mid-March, more work likely remains to be done.
The Democratic sweep of the Senate races in Georgia, which gives the party control of both the White House and Congress, paves the way for a swift implementation of Biden’s economic agenda, which will likely include more stimulus in the near-term. Biden also plans to pour dollars into the infrastructure and clean energy industries to create millions of jobs in the medium and long-term.
But the new administration will also have to tackle the here and now: The jobs recovery, which was buoyant in the summer, has slowed down for months.
The employment-population ratio stood at 57.4% in December — flat from the previous two months, meaning that real improvements, proportionate to the population, have been missing for the entire fourth quarter.
Workers who have lost their jobs through no fault of their own still need the government’s help to make ends meet. The BLS reported that 15.8 million people were unable to work in December because their employer closed or was negatively affected by the pandemic, an increase of 1 million from November.
Economists expect job growth to be tepid at best at the start of this year and until the virus is brought under control through vaccinations or social restrictions. There could be more job losses in the coming months, Zhao said, but even if not, the recovery could remain on pause for a while longer.
But ultimately, the vaccine offers a light at the end of the tunnel.
“While these bleak numbers represent a weak handoff to 2021, the labor market recovery is expected to strengthen over the spring and summer as vaccinations lead to a gradually improving health situation,” said Gregory Daco, chief US economist at Oxford Economics.