The US labor market slammed into reverse last month, December’s hotly-anticipated NFP report showed.
The world’s largest economy shed 140,000 jobs in the final month of 2020, far worse than the 50,000 job gain consensus expected.
The range of estimates was wide. 66 economists delivered guesses that ran the gamut from -400,000 to +300,000. So, while the actual headline print will be pitched as a downside “surprise” — an “unexpectedly” dour result — that’s a misleading characterization.
This validates Wednesday’s downbeat ADP report and underscores the intractable nature of the labor market malaise as captured in weekly jobless claims.
Not that anyone needed “validation.” After all, the US epidemic worsened materially at year-end, with daily infections, fatalities, and hospitalizations all hitting records. That, in turn, prompted fresh containment measures to the detriment, apparently, of jobs.
“In December, job losses in leisure and hospitality and in private education were partially offset by gains in professional and business services, retail trade, and construction,” the BLS said.
ADP’s data showed private employers laying off more than 100,000 services sector workers. The details of December’s NFP report paint a grim picture. Specifically, employment in leisure and hospitality declined by almost half a million.
As the BLS went on to note, “three quarters of the decrease [came] in food services and drinking places.” Nearly 100,000 jobs were shed in the amusements, gambling, and recreation industry. Overall, employment in leisure and hospitality remains nearly 4 million short of pre-pandemic levels.
Manufacturing added 38,000 jobs, which, when juxtaposed with the carnage in leisure and hospitality, underscores the two-speed, bifurcated character of the post-pandemic US labor market.
Private payrolls dropped 95,000 in December, versus consensus for a 25,000 gain. The range there was -150,000 to +150,000.
Average hourly earnings were 0.8% higher MoM, which is four times more than consensus expected. YoY, the gain was 5.1%, versus an expected 4.5% jump.
The unemployment rate held steady at 6.7%. The household survey data was revised using updated seasonal adjustment factors, a procedure the BLS reminds you is done at the end of each calendar year.
As usual, I’ll get to the more granular breakdown shortly, but the headlines Friday will obviously revolve around the first monthly decline since April.
The acceleration in average hourly earnings is still noise. One has to account for where the jobs were lost in order to accurately appraise the “hot” MoM print.
It’s possible that, from the market’s perspective, revisions to October and November will help ameliorate December’s disappointing headline. The prior two months were revised higher by 44,000 and 91,000, respectively, which, when combined, conveniently offsets December’s drop. Funny how that works out.
In any event, the inescapable reality is that the US labor market’s momentum is gone. So, it will need to be resurrected, lest the economy should “reset” 10 million jobs lower than pre-pandemic levels.