The American economic recovery showed new signs of stagnation on Friday, with government data highlighting the pandemic’s brutal damage to the job market.
US employers created 49,000 jobs in January, the Department of Labor said, eliminating hopes that the new year will bring immediate relief. The private sector created just 6,000 jobs, just enough to record the millions of jobs lost during the pandemic.
The poor performance was recorded amid a new effort in Washington to provide a large infusion of aid to promote a recovery and the data will almost certainly reinforce the Democrats’ case for a robust stimulus package.
“It is very clear that our economy is still in trouble,” said President Biden of the latest reading on the labor market.
Seeking to strengthen the recovery, Biden and Congressional Democrats have been pushing for a $ 1.9 trillion relief measure. By passing budget resolutions in both chambers, Congress opened the way on Friday to seek final approval of the package in party votes, if necessary, within weeks.
Some Republicans said a smaller package would be sufficient, and others said it was too early for another round of aid.
But far from showing a recovering job market, Friday’s report provided evidence of a metastasis crisis. January’s limited earnings followed a total setback in December, when the economy lost 227,000 jobs, the first net drop since April and a bigger drop than initially reported.
And although the December losses were concentrated in some sectors exposed to the pandemic, the weakness in January was wide. Manufacturers, retailers and transportation companies have cut jobs, indicating that economic damage is spreading.
The unemployment rate fell from 6.7% to 6.3%. But the decline came in part because hundreds of thousands of people left the workforce, a sign that the crisis could leave lasting scars. A year earlier, the unemployment rate had been 3.5 percent, the lowest level in 50 years. The economy still has almost 10 million fewer jobs than before the pandemic.
“There is very little to celebrate in this report,” said Julia Pollak, a labor economist at jobs site ZipRecruiter. “Almost all the measures I expected would point in the right direction disappointed.”
Still, by returning to growth, even if marginal, the economy avoided a second consecutive month of job losses, a prospect that some economists feared due to the double blow of growing cases of coronavirus and reduced federal aid. Both forces are now reversing: coronavirus cases are falling across much of the country, and the $ 900 billion aid package approved by Congress in December is taking a measure to help families and businesses.
Indeed, despite the bleak start to the new year, many analysts predict that the economy will strengthen from now on. In addition to the December stimulus, the vaccination push, although slower than expected, is paving the way for wider reopening, even with coronavirus mutations around the world making implantation more urgent.
“It is a positive sign that we have overcome those speed reducers and the wheels have not left the car completely,” said Nick Bunker, head of research at the De facto workplace.
For Hand & Stone, a national chain of massage studios and facial spas, the pandemic’s resurgence in winter was a setback after a month-long reopening process. California and other states have imposed restrictions that have closed many spas completely and forced others to cut services. And the loss of personal traffic has reduced sales of gift cards, often a great source of business over the holidays.
“The reticence to go out and get involved in the economy and stores was a big negative,” said Todd Leff, the company’s chief executive.
But with the gradual decline in Covid-19 cases allowing for the reopening of its spas, business began to recover. And Leff is optimistic about widespread vaccination to alleviate customers’ fears.
“I think we will see a lot of this pent-up demand come back,” he said.
The concern is that, for many families and businesses, recovery may come too late.
The proportion of people working or looking for work remained depressed in January compared to their pre-pandemic level. This suggests more weakness in the labor market than implied by the slow declining unemployment rate, which only tracks people who are actively applying for work. Continued stoppages and health concerns can keep job seekers on the sidelines.
Another concern is the growing number of Americans facing long-term unemployment – a growing scourge that can threaten not only individual workers, but the overall economic recovery.
More than four million people in January had been out of work for more than six months, the standard definition of long-term unemployment. That number increased slightly from December and almost four times the number before the pandemic began.
Long-term unemployed now account for almost 40% of all unemployed workers, the largest share since the aftermath of the 2007-9 recession. This does not include people who have given up looking for a job or who are unable to work because of childcare or other responsibilities.
Economic research shows that when people are unemployed for long periods, they find it more difficult to find jobs. This – combined with companies that have also faced prolonged hibernation – can leave a lasting economic loss.
“The longer a recession lasts, the more scarring can be permanent,” said Beth Ann Bovino, chief economist at S&P Global Ratings Services in the United States. “For those people who have been unemployed for a long time, those companies that need to reopen, it takes time. It’s not like turning the lamp on and off. “
Jenna Fortino, 26, was fired from her job on the travel website Expedia in October and moved from her apartment in Washington, DC, and back with her parents in New Jersey. She has lost count of the jobs she has applied for, but she is optimistic that something will work out soon.
“Hopefully, you know, in the next two weeks something will come out of what I’m going through,” she said. “I wouldn’t wish that on anyone. It is a defeat. “
The labor market has pockets of strength. The sectors least dependent on workers’ personal interactions with colleagues and customers, such as professional services and finance, continued to create jobs in January.
This bifurcated recovery can widen the racial and gender disparities that have been widened by the pandemic. Black and Hispanic workers, especially black and Hispanic women, are responsible for job losses in low-income sectors, such as travel and restaurants, which may now be among the last to reopen fully.
“This is disproportionately affecting the most vulnerable groups,” said Kweilin Ellingrud, senior partner at McKinsey Consulting and co-author of a recent report that predicts a slow recovery for the hardest-hit workers.
However, there are signs of better times in the job market. Employers are cautiously optimistic that the economy will reopen more fully as more Americans receive vaccines and the pandemic subsides. Many people are still nervous about returning to work because of health and safety or child care issues, but are prepared to return to the workforce when conditions improve.
Sarah Hierholzer, 23, worked as a host at an improv theater in Chicago until March, when she temporarily fired everyone in response to the pandemic. In June, she said, she was informed that the theater was definitely closing.
Hierholzer said he applied for more than a hundred jobs, including a job at Trader Joe’s. But, except for a brief stint at the Chicago Electoral Council in the fall, she was unlucky. Recently, however, she found a temporary job doing data entry at a securities company.
“It’s definitely a relief to have a job,” she said, “even if it’s not necessarily a dream job.”
Jeanna Smialek contributed reports.