Off The Wire
Moderate U.S. job growth in January bolsters case for large stimulus package
WASHINGTON (Reuters) - U.S. employment growth rebounded moderately in January and job losses in the prior month were deeper than initially thought, underscoring an urgent need for additional relief money from the government to aid the recovery from the COVID-19 pandemic.
The Labor Department’s closely watched employment report on Friday showed job losses in manufacturing and construction, two sectors which have been propping up the economy. There were further losses at restaurants and bars. Retailers and employers in the transportation industry also laid off workers.
President Joe Biden is pushing the U.S. Congress to pass a $1.9 trillion recovery plan, which has been met with resistance from mostly Republican lawmakers, now worried about the swelling national debt. The Senate worked late into the night on Thursday, with Biden’s fellow Democrats aiming to override Republican opposition to the sweeping COVID-19 relief plan.
“The weakness portrayed in today’s labor report opens the door for the Biden administration to push forward with a higher spending package and provide relief for many Americans and businesses that continue to struggle with the pandemic,” said Charlie Ripley, senior Investment Strategist at Allianz Investment Management.
Nonfarm payrolls increased by 49,000 jobs last month. Data for December was revised to show 227,000 jobs lost instead of 140,000 as previously reported. Employment is 9.9 million jobs below its peak in February 2020.
The Congressional Budget Office has estimated employment would not return to its pre-pandemic level before 2024. Economists polled by Reuters had forecast payrolls rising by 50,000 jobs in January.
The government also said the economy created 250,000 fewer jobs in the 12 months through March 2020 than previously reported.
December’s drop in payrolls was the first in eight months and came amid renewed restrictions on businesses like restaurants and bars to slow a resurgence in coronavirus infections. Though those curbs on businesses continued into the first half of January, there is reason for cautious optimism as some employment measures have been stabilizing since the second half of January as authorities began easing restrictions.
The government surveyed businesses and households for January’s employment report in the middle of the month. It also noted that the response rate to the survey was “slightly below average.”
Nearly $900 billion in additional relief money provided by the government at the end of December will likely help in the months ahead. In addition, the pace of COVID-19 infections appears to have peaked in early January, a trend that could give a lift to hiring in the months ahead, should it hold.
Infections hit a one-day record of roughly 300,000 in early January but by month’s end were averaging closer to 100,000 a day, with most of the country seeing a downward trend, according to a Reuters tally.
U.S. stocks opened higher. The dollar fell against a basket of currencies. U.S. Treasury prices were mostly lower.
LONG ROAD TO RECOVERY
Last month, manufacturing payrolls decreased by 10,000 jobs, while employment at construction sites dropped by 3,000.
Retailers shed 38,000 jobs and healthcare employment declined by 30,000. The transportation and warehousing industry lost 28,000 jobs. There were 61,000 job losses in the leisure and hospitality sector. But employment in professional and business services increased by 97,000 jobs.
Government payrolls rose by 43,000 jobs, lifted by gains in state and local government education.
Though the unemployment rate dropped to 6.3% in January from 6.7% in December, that was because of people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the jobless rate would have been 6.9%.
The decline in the unemployment rate also came as people gave up the search for work.
Just over 4 million Americans have been unemployed for more than six weeks, accounting for 39.5% of the jobless in January.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, dipped to 61.4% from 61.5% in December. The participation rate has declined significantly during the pandemic, with women accounting for the biggest share of dropouts.
That has been attributed to difficulties securing child care as many schools remain closed for in-person learning.
“There is still an enormous amount of work to do to get back to maximum employment,” said Chris Low, chief economist at FHN Financial in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci