WASHINGTON (Reuters) – US private companies cut workers in December for the first time in eight months as out-of-control COVID-19 infections trigger a new wave of trade restrictions, setting the tone for what is likely to be a brutal winter for the economy.
ADP’s national employment report on Wednesday showed job losses in all industries last month as the coronavirus outbreak kept many consumers and workers at home. Although the report highlighted the scale of the crisis, the economy is unlikely to slip back into recession, thanks to additional fiscal stimulus approved at the end of December.
The ADP report added to declining consumer spending and persistently high layoffs, suggesting that the economy lost significant momentum at the end of 2020. The minutes of the Federal Reserve’s December 15-16 meeting released on Wednesday showed that policy makers the explosive cases were expected to be “particularly challenging for the labor market in the coming months. “
“America’s great job machine has faced a wall of growing coronavirus cases and state blockages, endangering the entire economic recovery from the recession,” said Chris Rupkey, chief economist at MUFG in New York. . “The heart of every recession is job losses, and right now the decline in jobs at the end of the year suggests that the dark days of the labor market last spring have returned.”
Private wages fell 123,000 jobs last month, the first decline since April, after rising 304,000 in November. Economists polled by Reuters had predicted that private wages would rise by 88,000 in December.
The ADP report is jointly developed with Moody’s Analytics. Although it has an unforeseen record that predicts the number of private wages of the government due to methodological differences, it is still tracked for indicators of the health of the labor market.
(GRAPHIC: ADP -)
Cases of COVID-19 in the United States have risen to more than 20 million, with more than 352,000 deaths since the virus first appeared in China in late 2019, according to the US Centers for Disease Control and Prevention.
In addition to the virus, the labor market has been constrained by government delays in providing another aid package for businesses and the unemployed.
More than $ 3 trillion in tax incentives has helped companies recruit workers and keep others on payroll. It also helped millions of unemployed and underemployed Americans pay their bills and keep spending on record growth in the third quarter. Nearly $ 900 billion in additional government bailout money was approved in late December.
“While the economy is on the verge of escaping twice, I don’t think it will succeed,” Moody’s Analytics chief economist Mark Zandi told reporters. “The additional $ 900 billion will help ensure that the economy does not return to recession.”
It is probably more of a fiscal stimulus. Democrats won a Senate race in Georgia and led another Wednesday, approaching a surprise blow in a former Republican city that will give them control of Congress and more power to advance President-elect Joe Biden’s agenda .
Shares on Wall Street rose, and the Dow and S&P 500 hit record highs as investors bet on more incentives and infrastructure spending from a Democratic-led Congress. The dollar won against a basket of currencies. US Treasury prices have fallen.
LONG WEAKNESS
Production lost 21,000 jobs in December, while wages in the private services industry fell by 105,000. There have been 13,000 job losses among small companies. The salaries of large companies fell by 147,000. The average company hired 37,000 workers last month.
The ADP report was published ahead of the government’s monthly comprehensive employment report on Friday. According to a Reuters poll conducted by economists, private non-agricultural wages probably rose by 98,000 jobs in December, after rising by 344,000 in November.
Given that government wages fell again last month, it is estimated that general non-farm wages will rise by 71,000 jobs, after rising by 245,000 in November. This would be the smallest gain since the job recovery began in May and would mean that the economy recovered about 12.5 million of the 22.2 million jobs lost in March and April.
Economists predict that it could take some time for all lost jobs to be recovered, even with additional tax support and the herd’s immunity to the virus from vaccines being released. The fall in private wages ADP supports the expectations of several economists that the economy will lose jobs in December, although these terrible forecasts were countered by a survey on Tuesday which showed that factory employment returns in December.
Other economists said this supported job growth last month, albeit at a significantly slower pace than in November.
Estimates of economic growth for the fourth quarter are around an annualized rate of 5.0%. The economy grew at a historic rate of 33.4% in the third quarter, after declining at a rate of 31.4% between April and June, the deepest since the government began keeping records in 1947.
Reporting by Lucia Mutikani; Montage by Andrea Ricci