Barron‘s - January 13, 2021
While the headline jobs figures paint a picture of a deteriorating economy, the underlying details are far more encouraging and suggest the U.S. economy is poised to rebound swiftly once vaccines eradicate the virus and facilitate a return to normalcy.
Start with the jobs figures for December, published Friday. While payroll employment fell by 140,000 compared with November, this number is composed of two distinct stories. Sectors affected by the third wave of the virus—leisure and hospitality, personal services, and education—lost 603,000 jobs. That sounds bad, but the displaced workers should have their income protected thanks to the combination of the fiscal package passed at the end of last year and the plans currently under consideration for a follow-up package.
Meanwhile, the rest of the economy added 463,000 jobs, which is better than in prior months. If the job market were really in trouble, the losses would be broad-based, as they were earlier in the year, when everyone from software engineers to lawyers was dealing with layoffs.
There were three other signs of improvement: the rise in the number of Americans working full-time, the sharp decline in the number of unemployed Americans who don’t expect to be recalled to work by their previous employer, and the big drop in the number of Americans working part-time who would prefer to be working full-time. All of this suggests that the economy is poised to snap back when the health situation is finally fixed.
New data on hiring, layoffs, and job openings for November, published on Tuesday, are consistent with this broader picture. While the number of Americans who were laid off rose sharply in November, this was driven entirely by the “accommodation and food services” sector, which was hit hard by the third wave of the virus. Layoffs rose from 130,000 in October to 393,000 in November, or from 1.1% of the employed workforce to 3.4%. In the rest of the economy, layoffs were flat. The layoffs at restaurants and hotels were worse than any other month on record other than March and April 2020.
Excluding the initial months of the pandemic, November 2020 was the worst month for layoffs in the accommodation and food service sector ever recorded.
Also encouraging: The number of private-sector job openings is still holding up, even if it remains about 6% below the pre-pandemic level. In past downturns, job openings collapsed as companies hunkered down. As a result, the number of jobless workers—excluding those who expect to be recalled by their current employer—is relatively low compared to the number of job openings.
The situation isn’t as good for workers as it was immediately before the pandemic, but it looks pretty good considering the amount of fiscal support in the pipeline, the strength of household balance sheets, and the imminent mass deployment of vaccines.
Ultimately, what matters most for workers and the economy is getting the virus under control. Assuming that happens soon—and the odds continue to look up—everything else should be able to fall back into place.
By Matthew C. Klein
Write to Matthew C. Klein at email@example.com