Employment retreated in December for the first time since April, giving way to conditions and restrictions wrought by the resurgent COVID-19 pandemic.
The U.S. Bureau of Labor Statistics reported that total nonfarm payroll fell by 140,000 in December, with losses mounting in sectors that continue to be hardest hit by the coronavirus. Leisure and hospitality employment fell by 498,000, with three-quarters of the decrease (372,000 jobs lost) in food services and drink establishments due to many restaurants and bars being forced again to close. Since February, leisure and hospitality jobs have plummeted by 3.9 million, or 23.2%.
Education also took a big hit, with employment in private education shedding 63,000 jobs in December and state government education losing another 20,000.
Overall, total employment remains 6.5% below February’s pre-pandemic level. December’s negative labor growth held the unemployment rate steady at 6.7%, the first time since May the jobless rate failed to decrease. The labor participation rate also remains dampened at 61.5%.
“The losses also underscore a broader trend that has persisted for months and only worsened in December: Low-wage industries are bearing the brunt of employment losses during the pandemic,” said Zillow economist Matthew Speakman. “According to the Census Bureau, 0.9% of jobs in lower-paying occupations were lost in December alone, while middle-wage and higher-wage industries added 0.5% and 0.3% more jobs, respectively. And there are still 12% fewer jobs now in lower-income roles than there were in February.”
As Speakman noted, some sectors did see jobs grow, partially offsetting December’s losses. Employment in professional and business services grew by 161,000, for example, though as Speakman said, many of those additions aren’t going to low-wage workers who have thus far experienced COVID-related job losses. Retail trade did add 121,000 jobs in December thanks to holiday shopping, though employment in the sector remains 411,000 jobs below February’s pre-pandemic level.
Construction employment also rose, which should help boost the still-resilient housing industry, said Mortgage Banking Association (MBA) chief economist Mike Fratantoni.
“It is notable that there were gains of 51,000 in construction employment in December,” he said. “The lack of inventory is the biggest constraint to further growth in home sales this year. More workers in the sector should support the faster pace of housing construction the market needs.”
Another silver lining in the report was that many of December’s layoffs were temporary, keeping workers connected to employers and offers hope for quicker re-hiring once activity ramps up again.
“The increase in those on temporary layoff reflects the impact of renewed lockdowns and other restrictions, while the decrease in those in the long-term unemployed category is positive, as it may reflect that these workers have been successful in finding work,” Fratantoni said. “While this is good news, some workers’ new job may well be at a lower income than their prior position.”
Fratantoni said that the MBA expects job gains to pick up in the second half of 2021 as the pace of vaccine deployment accelerates, offering an outlet for pent-up demand for goods and services. The MBA’s prediction was corroborated by commentary from Wells Fargo Securities senior economist Sarah House.
“Savings are burning a hole in many people’s pockets after having to avoid travel, in-person dining and entertainment for nearly a year,” said House. “With the means and eagerness to get back to ‘normal,’ hiring could ramp up quickly once COVID cases are more under control. That could be particularly true in the hard-hit leisure and hospitality industry, which accounts for 40% of the 9.8 million net job losses since February and can hire quickly given that workers need few specialized skills.”
Overall, Fratantoni said, conditions remain supportive for a strong year ahead in the lending industry.
“Despite the negative news from this report,” he said, “we still expect 2021 to be a record year of purchase mortgage originations volume.”
