Here’s The Real Problem With December’s Jobs Report

I suppose one read-through from December’s jobs report is simply that the case for more fiscal stimulus is now stronger.

With the Senate set to flip to Democrats, Joe Biden, Nancy Pelosi, and Chuck Schumer will almost invariably move quickly to send larger direct payments to Americans.

The abject malaise apparent in the leisure and hospitality industry underscores the fact that a services-driven economy which lives and dies by consumption will be a volatile beast in the event some exogenous shock curtails activity in high-contact industries.

Of the nearly half-million jobs lost in leisure and hospitality last month, 372,000 came in restaurants and bars. That hurts (figure below).

This will continue to be a concern as long as the US fails to contain the spread of the virus.

Rick Santelli’s shrill objections notwithstanding, it’s obviously the case that the chances of contracting COVID in a restaurant where diners aren’t wearing masks (because how else would you eat?) are greater than the chance of getting sick while roaming the cavernous interior of a Lowe’s, where the front doors are always opening and closing, and where the difficulty isn’t staying six feet apart from other people, it’s finding someone to talk to you when you get lost.

In any case, on the “structural damage” front, the December jobs report showed a sharp decline in permanent job losers.

The situation is still the furthest thing from “good,” something the BLS underscored. “The number of permanent job losers declined by 348,000 to 3.4 million in December, but is up by 2.1 million since February,” the government said Friday.

The figure (below), from Bill McBride, is always worth a look.

That’s headed in the right direction, but it’s far too early to celebrate.

Unfortunately, the total number unemployed for 27 weeks or more remained stuck at almost four million in December.

Expressed as a percentage of the total unemployed, that figure is more than 37%.

Even so, those categorized as jobless for between 15 and 26 weeks dropped, as did the number unemployed for five to 14 weeks.

I could go on. And on. As regular readers are acutely aware, brevity isn’t my strong suit.

But I can sum this up by simply noting that efforts to find a silver lining aside, the problem with December’s jobs report is glaringly obvious. Bloomberg’s Chris Anstey managed to hit on it.

“We’re bound to see economists downgrade next Friday’s retail sales release after this,” Anstey mused. “With half a million fewer folks working in the leisure and services industry, (a) they are unlikely to have boosted their spending and (b) the places where they worked were unlikely to have done more business last month.”

Bingo! Thanks, Chris.

And it’s not about one retail sales print. That is, whether or not Anstey’s assessment is correct vis-à-vis one monthly data point, his brief remarks spoke to the underlying problem with the world’s largest economy. It’s the same problem I outlined in “America’s Economic Model Is Unsustainable. Empower The 4.”

With that, I’ll leave you with some key excerpts from that linked piece, which you should consider in the context of the large job losses in leisure & hospitality last month:

A disproportionate amount of economic activity is accounted for by consumption that takes place at restaurants and retail stores.

The people doing the eating and the shopping are, by and large, not making much more than the people serving the food and stocking the shelves, precisely because they are the same people (in an economic sense).

How is that sustainable? It’s circular to the point of absurdity. The people providing the services for meager wages are in most cases the same people consuming them when they’re not providing them.