US jobs report, January 2021: Payroll grows less than expected after further decline in December

Photographer: George Frey / Bloomberg

The recovery in the US labor market disappointed for the second month in January, with only modest job growth, highlighting the persistently difficult prospects for millions of unemployed and reinforcing calls for more stimulus.

Non-farm payrolls increased by only 49,000 after a revised downward reduction of 227,000 in December, according to a Department of Labor report on Friday. The unemployment rate dropped to 6.3%, reflecting the acceleration in the number of employed persons and the increase in the abandonment of the labor market.

The January data could strengthen the case for another sizeable pandemic relief package. President Joe Biden has proposed a $ 1.9 trillion package, but many Republicans prefer to postpone more aid and hope that the December $ 900 billion aid package will be filtered by the economy.

“Without further assistance, our economy will continue to struggle,” said Heather Boushey, a member of the White House Council of Economic Advisers, in an interview with Bloomberg Television after the report. “We need to continue to act and we need to do it quickly.”

Read more: Tracking Coronavirus Stimulus in the USA

Private payroll increased by just 6,000 last month, constrained by job cuts in retail trade, transportation and storage, leisure and hospitality, while other sectors saw only modest gains. The latest job numbers have reduced a recent series of stronger economic data, including growth in industry and home building.

At the same time, the report included some positive points. Americans are working longer hours and the number of jobs in temporary relief services has increased more in three months, which may herald an increase in hiring in the coming months.

The average number of hours per week rose to 35, the highest in 2006 data. Payroll for temporary aid services rose by almost 81,000.

The report “shows a job market that is sailing on water,” said economists Joseph Song and Alexander Lin of Bank of America Corp. “But there are some nascent signs of better things to come.”

The median estimates in a Bloomberg survey of economists pointed to a gain of 105,000 in payroll and an unemployment rate of 6.7%. Shares rose after the report, the yield on the 10-year Treasury bill rose and the dollar fell.

Year of pandemic

The economy lost 9.3 million jobs in 2020, according to revised government data.

Activity and business restrictions have eased, but fears of more contagious virus variants may limit consumer activity. Sectors sensitive to the pandemic, such as leisure and hospitality, are likely to remain depressed until widespread vaccination allows for large spending on services.

Poor industry breakdown

• Leisure / hospitality payrolls dropped 61,000 after a 536,000 fall in December
• Health care / social assistance dropped 40,800
• Retail trade decreased by 37.8 thousand
• Transport / storage dropped 27.8k after dropping 24.1k
• Manufacturing dropped by 10,000 in January

“The January data raises concerns that the weakness that is supposed to be concentrated in sectors such as leisure and hospitality may be more widespread,” said Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Eliza Winger in a Note.

When it comes to payments, average hourly earnings increased by 0.2% over the previous month and 5.4% over the previous year. These figures have been difficult to interpret during the pandemic, given the scale and distribution of job losses and gains.

And as a sign of the challenges ahead, almost 40% of the unemployed have been out of work for 27 weeks or more. This group, known as the long-term unemployed, has changed little since December, with just over 4 million.

Digging deeper

• The unemployment rate would have been 0.6 percentage points higher if poorly classified workers were included among the unemployed
• Unemployment rates declined in January for whites, Hispanics and black Americans; The unemployment rate has increased for Asian Americans. Read More On here
• The participation rate for women aged 25 to 54 years remained unchanged at 74.8%, still significantly below pre-pandemic levels
• The U-6 rate, also known as the underemployment rate, dropped from 11.7% to 11.1%. (Unlike the headline unemployment rate – or U-3 rate – the U-6 includes those who are employed part-time for economic reasons and those who have stopped looking for a job because they are discouraged by their job prospects)
• The employment diffusion index, a measure of the extent of hiring in private industries, fell from 61.9 to 48.1. January’s number is the lowest since April
• Average weekly hours for non-supervisory workers rose to 34.4 in January, the longest workweek since 2000

– With the help of Kristy Scheuble, Sophie Caronello and Jonathan Ferro

(Adds economist comment)