WASHINGTON (Reuters) – The US economy probably created the fewest jobs in seven months in December or even eliminated workers as the country was under attack by COVID-19 infections, marking the beginning of what is expected to be a gloomy winter.
Despite the anticipated weakness in the Department of Labor’s closely watched employment report on Friday, the economy is unlikely to fall back into recession, with an additional government-approved pandemic exemption in late December providing a backstop. More fiscal stimulus is expected.
This week, Democrats won two seats in the Senate in Georgia’s by-elections, gaining control of the chamber and raising prospects for President Joe Biden’s legislative agenda.
Biden will be sworn in on January 20, with the economy recovering just over half of the 22.2 million jobs lost during the recession that began in February. At least 19 million Americans receive unemployment checks.
“Job growth has slowed as the slight part of the job market recovery, remembering workers, has largely taken its course,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Growing COVID-19 houses and stricter restrictions to limit the spread of the virus had a large share of the labor market in December.”
Non-farm payrolls were likely to rise by 77,000 jobs last month, after rising by 245,000 in November, according to a Reuters poll by economists. This would be the lowest gain since the job recovery began in May and will leave employment with about 9.763 million jobs below its peak in February.
There is even a high possibility that wages will fall in December, which would put an end to a series of seven-month hires. Applications for unemployment benefits for the first time rose in mid-December, when employers were surveyed for their employment report.
The companies announced an 18.9% increase in layoffs last month, and a measure of employment in the services industry has contracted. Consumers have also been very discouraged in assessing the labor market.
STIMULUS, VACCINES HOPE
But any drop in wages is unlikely to mark the beginning of job losses. Congress approved nearly $ 900 billion last week as an additional stimulus, which is expected to increase household income and consumer spending. Economists anticipate that the Biden administration will provide another package by March and increase infrastructure spending.
There is also optimism that the launch of coronavirus vaccines will be better coordinated under the new government.
“We are in the midst of a slowdown that must go through stopping the holiday and the virus growing,” said Joel Naroff, chief economist at Naroff Economics in the Netherlands, Pennsylvania. “We hope that we will see better coordination in terms of vaccination, but given the indifference to the health of the population in the last few months, it is difficult to see that the growth of the virus will only get worse before it gets worse. improve”.
Last month’s wages were probably hampered by job losses in the leisure and hospitality sectors, with most jurisdictions banning indoor dining. The manufacturing and construction industries probably employed more workers to meet strong demand for goods, such as cars and homes. This highlights what has become known as the K-shaped recovery, in which better-paid workers are doing well while lower-wage workers are struggling.
Government employment is likely to fall for the fourth month in a row. Most job losses have been in the education of local authorities, with most schools switching to online learning.
The unemployment rate is expected to rise to 6.8% in December from 6.7% in November. The unemployment rate has been underestimated by people who mistakenly classify themselves as “employed but absent from work”.
The government will review, on Friday, the series of surveys on households from which the unemployment rate comes, back five years ago. However, revisions are not expected to correct the classification error.
“Given the massive fluctuations in most major series of household surveys in 2020, these revisions are likely to be higher than usual this year, but obviously will not change the basic story of a sharp decline in employment. work in the spring followed by sustained but incomplete recovery in the coming months, ”said Lou Crandall, chief economist at Wrightson ICAP in Jersey City.
The reviews will include the labor force participation rate or the proportion of working-age Americans who are or are looking for a job, as well as the employment-to-population ratio, which is seen as a measure of an economy’s ability to create jobs. .
Reporting by Lucia Mutikani; Montage by Cynthia Osterman