The December employment report, out Friday, could show job losses for the first time since April.
The hit to the labor market would come as COVID-19 surges led to new business constraints, partially reversing the nation’s recovery from a pandemic-induced recession that wiped out 22.2 million jobs in early spring.
Restaurants were hit hardest by closures and layoffs early in the pandemic and drove the jobs rebound as they reopened. They’re now accounting for much of the pullback in employment amid the new curbs, economists say.
Economists view the development as a setback that could last through February before giving way to a stronger economy and job market as a vaccine becomes widely available in late spring. But it could leave lasting damage and slow the recovery if the lapse is more severe than anticipated.
“The next two, three months could well be the most consequential of the pandemic” for the economy, says economist Troy Ludtka of research firm Natixis.
While economists surveyed by Bloomberg project the Labor Department will report 62,000 job gains in December, several others reckon employment declined. Capital Economics estimates 100,000 job losses; Natixis, 84,000; Goldman Sachs, 50,000; and Oxford Economics, 24,000.
Bloomberg’s survey also forecast that the unemployment rate ticked up to 6.8{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} from 6.7{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1}.
Private payroll processor ADP said Wednesday that U.S. businesses lost 123,000 jobs last month.
Employment gains have slowed steadily since peaking at 4.8 million in June, with 245,000 jobs added in November. The nation has recouped 12.3 million, or 56{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1}, of the 22 million net jobs shed in March and April as restaurants and other businesses have reopened, recalling furloughed workers, and new hiring has picked up.
But the advances have continued to wane as other outlets have remained temporarily shuttered or closed permanently, and COVID-19 surges over the summer and the past couple of months have led states and localities to reinstate restrictions on businesses.
COVID-19 spikes
Daily coronavirus cases have hit new records amid holiday travel and gatherings, and colder weather. Many states grappling with the spikes have barred indoor dining, reduced capacity limits at stores and restaurants or forced outlets to shut down completely. California, for example, has shuttered salons, movie theaters, bars and breweries, among other rollbacks.
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About 25{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} of small businesses that were open in January 2020 were closed last month, according to Homebase, which provides employee scheduling software. The number of employees working was down 3{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} in early December compared with a month earlier, Homebase says.
And initial jobless claims, a measure of layoffs, were nearly 200,000 higher during the December week in which Labor conducted its jobs survey than during the comparable week in November.
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More than 100,000 restaurants have closed permanently, according to the National Restaurant Association. And 58{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} of independent and chain restaurants expect continued furloughs and layoffs from December through February, according to the trade group’s analysis last month.
The $908 billion relief measure recently passed by Congress should help, renewing forgivable loans to small businesses to cover payroll and other costs for two months. The package also extends unemployment benefits for 14 million Americans.
Restaurants bear brunt of job losses
Still, “I presume it won’t be enough,” to prop up many businesses, says Oxford economist Kathy Bostjancic. She estimates that leisure and hospitality, which includes restaurants and bars, lost 154,000 jobs last month.
Retail, she figures, lost 62,000. And state and local governments – coping with massive revenue losses even as they provide more health and other services – lost about 20,000 jobs, Bostjancic estimates. Also, the federal government let go another 3,000 temporary workers brought on for the 2020 Census.
Yet manufacturing is adding jobs as consumers stuck at home continue to buy furnishings, appliances and electronics. And the housing boom is creating lots of jobs for construction workers. Both of those sectors likely added 60,000 positions last month, Oxford says.
Bostjancic isn’t forecasting further job losses in January or February, though she says that’s possible, and doesn’t foresee the U.S. slipping into another recession after emerging from its worst-ever downturn in April and May. Economists surveyed by Wolters Kluwer Blue Chip Economic Indicators estimate the economy grew at a 3.8{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} annual rate in the fourth quarter and will expand at a 2.3{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} clip the first three months of 2021 before picking up steam the rest of the year.
A boom by mid-year?
Bostjancic thinks the economy could be roaring by the second half of the year, assuming the vaccine rollout goes as planned.
“We there’s a lot of pent-up demand” for travel, restaurant and other services among consumers, she says.
In the meantime, however, heavy layoffs and business shutdowns could feed off each other, as idled workers rein in spending, leading to further revenue losses and more permanent closures for restaurants and shops, even with the federal aid.
In November, the share of jobless workers who were permanently unemployed rose from 40 9{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1} to 44.2{c25493dcd731343503a084f08c3848bd69f9f2f05db01633325a3fd40d9cc7a1}, Oxford says.
Workers who stay unemployed for long periods and businesses that close for good leave lingering scars on that economy that slow the recovery, Bostjancic and Ludtka say.
“The longer we stay in this current crisis, the more likely there will be long-term scarring effects,” Ludtka says. “The next couple of months will be highly uncertain.”
