December Jobs Report: Recovery Goes Into Reverse

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The already sputtering economic rebound went into reverse last month as employers laid off workers amid rising coronavirus cases and delayed government aid.

U.S. employers cut 140,000 jobs in December, the Labor Department said Friday. It was the first net decline in payrolls since last spring’s mass layoffs and followed five straight months in which hiring had slowed.

The report was a grim capstone to a year in which the economy lost more than nine million jobs, the worst on a percentage basis since World War II. It also means that President Trump will be the first chief executive since Herbert Hoover to leave office with a net loss of jobs, with a four-year decline of about three million.

The unemployment rate was unchanged at 6.7 percent, down sharply from its high of nearly 15 percent in April but still close to double the 3.5 percent rate in the same month a year earlier.

December’s losses were heavily concentrated in the leisure and hospitality sector, which shed nearly half a million jobs as the resurgent pandemic led governors to shutter restaurants and families to cancel trips home for the holidays. Many forecasters expect those losses to continue into the new year.

“It’s a really vivid demonstration that the labor market can’t bounce back in any sustainable form until the pandemic is under control,” said Nick Bunker, head of North American research for the career site Indeed.

At an event in Wilmington, Del., on Friday, President-elect Joseph R. Biden Jr. said the report underscored the need for more federal help for households and businesses, including another round of direct payments to most Americans.

“With the pandemic raging, people are losing work and losing hope,” he said. “The bottom line is the jobs report shows we need to provide more immediate relief for working families and businesses now.”

Industries less exposed to the pandemic, like manufacturers and construction firms, continued to add jobs in December. Retailers, which laid off millions of workers last spring, added more than 120,000 jobs last month, a sign that they have learned to adapt to the pandemic.

And many of the latest job losses were temporary furloughs, which could be reversed quickly if the pandemic eases; permanent job losses, which had been rising, fell in December.

“You never like to see a contraction in employment in the economy,” Richard Clarida, vice chairman of the Federal Reserve, said in a webcast question-and-answer session Friday morning. “That said, the job losses were really concentrated in retail and hospitality” and “it’s not surprising, given the surge in new cases and hospitalizations.”

Robert Branca, who owns two dozen Dunkin’ locations in Massachusetts, said that business picked up steadily over the summer but that it had tailed off since then. A handful of his stores have closed for good, as have some other restaurants in which he was a partner. Others are on the edge.

“I have a few on the bubble that might not make it, especially as sales have tailed down through the winter,” he said.

The course of the virus in coming months will be critical, Mr. Branca said. But the vaccine rollout is even more important: Once his staff and customers feel safe interacting face to face again, he expects business to pick up. Even then, though, it will take time to rebuild from months of depressed sales.

“If you don’t go out of your house today, you’re not going to buy two cups of coffee tomorrow,” he said. “You’re never making that back up.”

Mr. Branca said he welcomed the latest congressional relief package, which offered direct help to small businesses and put money in customers’ pockets. It also extended unemployment benefits for millions of Americans who faced an imminent loss of income at the end of the year.

But the help came too late to save thousands of small businesses or to save many families from lasting financial harm.

“Some of the damage has already been done,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “We’re going to have to focus on healing, not just rebounding, from this crisis, because the wounds are deep.”

The December data underscored the deep inequality that has been a defining characteristic of the economic crisis. The low-wage workers who bore the brunt of the job losses in the spring — many of them Black and Hispanic women — did so again in December. Employment rose among men last month but fell among women, particularly Black women and Latinas. The unemployment rate among Hispanics jumped to 9.3 percent, from 8.4 percent in November.

Nearly four million Americans have been unemployed for more than six months, the standard threshold for long-term unemployment. That figure almost certainly understates the problem, because it excludes most people who aren’t looking for work, whether because they don’t believe jobs are available or because they are caring for children or other family members.

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