Job Growth Begins to Bounce Back, Slowly

Roy Maurer By Roy Maurer February 5, 2021
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U.S. payrolls climbed out from a hole in January, as employers added 49,000 new jobs, according to the latest employment report from the Bureau of Labor Statistics. Job growth had previously turned negative in December for the first time since May 2020, primarily due to restaurants and bars being affected by new pandemic-related restrictions and colder weather.

The country has recovered just over half of the 22 million jobs lost last spring, but the economic recovery has stalled in recent months.

"Today’s jobs report shows that the job market is off to a slow start in 2021," said Kevin Harrington, the CEO of Joblist. "January typically brings a huge month for hiring, as employers come back from the holidays and staff up for the new year. As vaccine rollout continues and the effects of the pandemic subside, the hope is that we will see the typical January hiring surge come in the spring and summer this year," he said.

"This is not a good start to 2021," said Nick Bunker, an economist at the Indeed Hiring Lab. "Today's report is essentially the opposite of what we need almost a year into the pandemic. Not only was payroll growth slow, but the gains were relatively concentrated in certain sectors. Compared to last month, we are adding jobs, however, more industries shed jobs in January than added them."

Glassdoor senior economist Daniel Zhao added that while the 49,000-job-rebound is positive, it's anemic. "Payrolls are still 9.8 million short of pre-crisis levels and adding only 49,000 jobs a month won't get us back to pre-pandemic levels at any reasonable pace," he said. "The economic recovery is rebooting, but it's like starting a fire with wet tinder while the pandemic rages on."

He added that the weak improvement was largely due to smaller-than-expected seasonal layoffs. "These seasonal layoffs should not be brushed off—the ongoing pandemic and economic crisis means that for these millions of laid-off Americans, jobs are scarce and unemployment benefits and savings may be exhausted. In a normal year, it would take until May for the labor market to make up for the January drop. Four months is a slog during normal times but a marathon during a pandemic."

The report also showed that there were 72,000 fewer jobs created in November 2020 than originally reported and 227,000 jobs lost in December 2020 rather than the 140,000 initially estimated.

Hospitality Still Reeling

Leisure and hospitality employment fell in January by 61,000 jobs, following a massive drop of over 500,000 jobs in December 2020. About 18,000 jobs were lost in hotels, motels and resorts and about 19,000 restaurant and bar jobs were eliminated. Since February 2020, employment in the leisure and hospitality sector is down by nearly 4 million jobs.

"High COVID-19 case counts made indoor service unsafe and frosty temperatures made outdoor service untenable," said Julia Pollak, a labor economist at ZipRecruiter, an online employment marketplace in Santa Monica, Calif. "Tighter COVID restrictions were also in place in many states. But since the reference week in the report, temperatures have started to rise, COVID cases have started to decline, and restrictions have since been relaxed in many states and cities. Restaurants, casinos and hotels should soon get a reprieve, as well as more relief."

Seasonal effects also drove job losses, Zhao said, as the end of the holiday season brought about job losses in retail (-37,800 jobs) and transportation and warehousing (-27,800 jobs).

Temporary help services saw the largest payroll gains in January with over 80,000 jobs added.

"Surges in temporary help employment often occur at times when businesses feel uncertain about the long-term outlook," Pollak said. "If conditions improve, some of these temporary roles could become permanent."

Additional employment gains for the month include growth in management and technical consulting services, education, wholesale trade and mining. Job losses were reported in construction, health care, and manufacturing.

Unemployment Drops

The unemployment rate in January fell to 6.3 percent from 6.7 percent the month before. The number of unemployed people is now just over 10 million. The number of long-term unemployed (those jobless for 27 weeks or more), is about 40 percent of the total at 4 million.

"The unemployment rate fell, but so did the labor force participation rate," Bunker said. "We are still well below where we were in February 2020, and to see no progress there is concerning."

Zhao added that temporary layoffs declined to 2.7 million from 3 million. This measure is down considerably from the recent high of 18 million in April 2020 but is 2 million higher than its February 2020 level.

"While temporary layoffs receded, permanent layoffs rebounded to 3.5 million, though permanent layoffs have not changed much over the last few weeks in a sign that the recovery may be mitigating some long-term economic scarring," he said.

Workers continue to face pandemic-related barriers to returning to work, such as school closures and health-related concerns, Pollak said. "The labor force has shrunk by 4.3 million in 12 months after continuing to contract in January," she said. "ZipRecruiter data suggest, however, that many Americans are prepared to return to work under the right conditions. "68 percent of active job seekers on ZipRecruiter say they would prefer remote work opportunities. And while remote jobs only account for about 9 percent of current vacancies, that share has steadily increased since the start of the pandemic and businesses have adjusted to the new normal."

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