Under The Hood Of A Bad Jobs Report

If nothing else, the January jobs report was poised to amplify calls for additional virus relief and more fiscal stimulus.

Market participants spent a good part of the week discussing what some hoped would be a big upside surprise on payrolls. The hype proved misguided.

The discrepancy with ADP (which showed private employers adding 174,000 jobs in January) was rather glaring. Once you net everything out, almost all of the gains from the NFP report were attributable to government hiring.

As noted earlier, the malaise continued for leisure and hospitality. The sector shed another 61,000 positions last month, and December’s losses were larger than previously reported, at -536,000. The scales on the visual (below) have been adjusted to “trim” the anomalous losses and gains in and around the first lockdowns last year.

The read-through for restaurants and bars isn’t great. With revisions, food services and drinking places have lost jobs for three consecutive months. That’s hardly surprising. After all, the winter COVID wave (and associated containment protocols) accelerated in earnest towards the end of October.

Panning out, more than 10% of the jobs in the restaurant industry which were regained from May through October were lost anew over the subsequent three months.

That will continue to have implications for spending and consumption more generally. If leisure and hospitality can’t recover, neither can the economy.

Speaking of spending, losses were also sizable in retail. The sector shed 38,000 positions, with declines in general merchandise stores, electronics and appliance stores, and nonstore retailers partially offset by gains in food and beverage stores and clothing stores. All in all, employment in retail is still almost 400,000 below pre-pandemic levels.

Turning to structural damage — the dreaded “scarring” effect — permanent job losers rose last month after a sharp decline in December.

At 3.5 million, the number of permanent job losers is 2.2 million higher than it was in February of last year.

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

The takeaway there is simply that we’re moving in the wrong direction again.

As a percentage of the total unemployed, those without a job for 27 weeks or more rose to a pandemic high of 39.5%.

We’re not too far off from record highs on that particular metric of despair.

Speaking to reporters at the White House on Friday, Joe Biden said “we can’t do too much on stimulus.” There’s no longer such a thing as “too much,” apparently.

The jobs data, he said, suggests the US labor market is 10 years away from full employment.


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3 thoughts on “Under The Hood Of A Bad Jobs Report

  1. Under the hood of the market today, appears leaning towards reflation. Fiscal side needs to come through and we are getting closer.
    I wonder if the Chinese will time tightening around our stimulus.

  2. “If leisure and hospitality can’t recover, neither can the economy.”

    Agree completely both for the US and the World: I gotta believe the leisure and hospitality industries will take, at the very very least, more that two more years to recover, although it will certainly recover in stages…

  3. I expect that once we’re three fourths of the way to herd immunity, there will be a boom with a rapidity akin to the bust. Once you have a vaccine and restaurants let you eat without a mask, would you eat out more or less often than before?

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