; Unemployment Rate Unchanged at 6.7%
The U.S. economy lost 140,000 jobs in December based on a survey of employers, the first month of net job losses since April, when the pandemic was devastating the labor market. There were job losses of almost 500,000 in leisure/hospitality services in December, including 372,000 in the restaurant industry, as the pandemic led consumers to avoid going out and states reinstated some restrictions on economy activity. The private sector lost 95,000 jobs over the month, while government employment fell by 45,000.
The U.S. economy lost 22 million jobs in March and April as consumers stayed home, states imposed restrictions on economic activity, and businesses closed temporarily. The economy added 7.5 million jobs combined in May and June as businesses reopened and consumers started to venture out again. But job growth has slowed in every month since June, and then employment actually fell in December with a resurgence of the pandemic. Employment in December was 8.5 million, or 6%, below its pre-recession peak in February.
The unemployment rate held steady at 6.7% in December; it had fallen in every month from May to November. There was actually a small increase in employment as measured in a survey of households, different from the survey of employers. The unemployment rate jumped from 3.5% in February to a record high of 14.7% in April. Although it has fallen steadily since then, it remains elevated.
Despite overall employment losses in December, many industries added jobs over the month. Goods-producing industries added 93,000 jobs, with solid gains in both manufacturing and construction. Private services-providing industries lost 188,000 jobs, although there were gains in most major industry categories, including professional/business services (+160,000) and retail trade (+120,000).
Record caseloads of the coronavirus caused a reversal in the labor market at the end of 2020. Consumers stayed home and many states and municipalities required businesses to cut back on capacity or close altogether. Restaurants were hit particularly hard, with job losses in other leisure/hospitality industries as well.
The labor market is likely to remain weak over the next few months, and employment could decline again early this year. Coronavirus caseloads are set to increase in early 2021 due to travel and parties over the Christmas and New Year’s holidays. But conditions should improve by the spring as vaccine distribution continues, warmer weather allows for more outdoor activity, consumers spend their stimulus funds, caseloads fall, and states gradually loosen restrictions on businesses. Job growth at the end of 2021 will be very strong and sustained, with the unemployment rate at around 6% and falling. Additional fiscal support under the Biden administration is an upside risk for the labor market outlook over the next couple of years.
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