WASHINGTON (Reuters) – The United States economy probably created the fewest jobs in seven months in December or even laid off workers while the country struggled with the onslaught of COVID-19 infections, marking the beginning of what must be a winter. strict.
Despite the weakness predicted in the Department of Labor’s employment report on Friday, the economy is unlikely to return to recession, with relief from the additional pandemic approved by the government in late December providing protection. More fiscal stimulus is expected.
Democrats won two Senate seats this week in Georgia’s run-off elections, gaining control of the chamber and raising prospects for President-elect Joe Biden’s legislative agenda.
Biden will take office on January 20, with the economy recovering just over half of the 22.2 million jobs lost during the recession that started in February. At least 19 million Americans are receiving unemployment checks.
“Employment growth is slowing, as the easy part of the job market recovery, worker recall, is almost over,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The increase in COVID-19 cases and the stricter restrictions to contain the spread of the virus were a major burden on the job market in December.”
The non-farm payroll probably increased by 77,000 jobs last month, after an increase of 245,000 in November, according to a Reuters survey of economists. That would be the smallest gain since the job recovery began in May and would leave jobs at around 9.763 million jobs below February’s peak.
There is even a strong possibility that the payroll fell in December, which would end a seven-month hiring sequence. The first applications for unemployment benefits skyrocketed in mid-December, when employers were asked for the employment report.
The companies announced an 18.9% increase in layoffs last month and a hiring measure in the service sector. Consumers were also very pessimistic in their assessment of the labor market.
STIMULUS, VACCINE HOPE
But any decline in payroll is unlikely to mark the beginning of job losses. Congress last week approved nearly $ 900 billion in additional stimulus, which is expected to increase household income and consumer spending. Economists predict that the Biden government will provide another package in March and increase infrastructure spending.
There is also optimism that the launch of coronavirus vaccines will be better coordinated under the new government.
“We are in the midst of a slowdown that needs to overcome holiday outages and the rise of the virus,” said Joel Naroff, chief economist at Naroff Economics in the Netherlands, Pennsylvania. “Hopefully we will see better coordination on the vaccination front, but given the indifference to health shown by the population in recent months, it is difficult to see that the increase in the virus will do anything, but it will get worse before it gets better.”
Payrolls last month were probably held back by job losses in the leisure and hospitality sectors, with most jurisdictions banning indoor meals. The manufacturing and construction industries have likely hired more workers to meet the strong demand for goods such as motor vehicles and homes. This highlights what has come to be known as a K-shaped recovery, in which the highest paid workers are doing well while the lowest paid workers are struggling.
Public employment probably declined for the fourth consecutive month. Most job losses occurred in local government education, with most schools switching to online education.
The unemployment rate is expected to have increased to 6.8% in December from 6.7% in November. The unemployment rate was underestimated by people who mistakenly classify themselves as “employed, but absent from work”.
The government will review on Friday the series of household surveys from which the five-year unemployment rate is derived. However, revisions are not expected to correct the misclassification.
“Given the wide swings in most of the major home survey series in 2020, these revisions are likely to be larger than normal this year, but will obviously not alter the basic storyline of a sharp decline in employment in the spring followed by an incomplete recovery in the following months, ”said Lou Crandall, chief economist at Wrightson ICAP in Jersey City.
The reviews will include the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, as well as the job-population ratio, which is seen as a measure of an economy’s ability to create jobs.
Reporting by Lucia Mutikani; Editing by Cynthia Osterman