WASHINGTON (Reuters) – The U.S. economy probably created the fewest jobs in seven months in December or even laid off workers as the country collapsed under the attack of COVID-19 infections. marking the beginning of what is expected to be a bleak winter.
Despite the weakness forecast in the Department of Labor’s employment report on Friday, the economy is unlikely to fall back into recession, with an additional government-approved pandemic relief in late December that will provide a break. More fiscal stimulus is expected.
This week, Democrats won two Senate seats in Georgia’s election, gaining control of the House and raising the prospects of President-elect Joe Biden’s legislative agenda.
Biden will be sworn in on Jan. 20, and the economy will recover just over half of the 22.2 million jobs lost during the recession that began in February. At least 19 million Americans receive unemployment checks.
“Employment growth has slowed as the easy part of the labor market recovery, which reminds workers, has followed its trajectory,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester. Pennsylvania. “The growth of COVID-19 cases and the stricter restrictions on containing the spread of the virus were a major weight in the labor market in December.”
Non-farm payrolls likely rose 77,000 jobs last month after rising 245,000 in November, according to a survey of Reuters economists. This would be the smallest gain since job recovery began in May and would leave approximately 9.763 million jobs below the February high.
There is even a strong possibility that payrolls would fall in December, which would end in a seven-month hiring streak. Applications for unemployment benefits for the first time increased in mid-December when employers were surveyed to obtain the employment report.
Companies announced an 18.9% increase in layoffs last month and a measure of employment in the service industry contracted. Consumers were also very disconcerting in their assessment of the labor market.
STIMULUS, HOPE VACCINES
But any pay cut is unlikely to mark the start of the job loss. Last week, Congress approved about $ 900 billion in additional stimulus, which is expected to raise household incomes and consumer spending. Economists predict that the Biden administration will provide another package in March and increase spending on infrastructure.
There is also optimism that the implementation of coronavirus vaccines will be better coordinated under the new government.
“We are in the midst of a slowdown that must overcome holiday breaks and the rising 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 that the population has shown in recent months, it’s hard to see that the rise in the virus will only get worse before improve”.
Last month’s payrolls were likely hampered by job losses in the leisure and hospitality sector, and most jurisdictions banned indoor food. The manufacturing and construction industries probably hired more workers to meet the strong demand for goods, such as motor vehicles and houses. This underscores what has come to be known as a K-shaped recovery, where better paid workers are doing well while lower paid workers are struggling.
Public employment is likely to decline for the fourth consecutive month. Most job losses have occurred in local government teaching, and most schools have moved on to online learning.
The unemployment rate is expected to rise to 6.8% in December, from 6.7% in November. The unemployment rate has been underestimated by people who mistakenly classify themselves as “employed but absent from work”.
The government will review on Friday the series of surveys on families from which the unemployment rate, which dates back five years, is derived. However, revisions are not expected to correct the classification error.
“Given the massive changes in most major series of household surveys in 2020, these revisions are likely to be larger than usual this year, but they obviously won’t alter the basic plot of a sharp drop in employment in the spring followed by a continued but 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 or are looking for work, as well as the employment / population ratio, which is considered a measure of the capacity of an economy. to create employment.
Report by Lucia Mutikani; Edited by Cynthia Osterman