The U.S. private sector unexpectedly laid off jobs in December as employment trends across the country abruptly weakened before Congress passed its latest antivirus package.
According to ADP’s closely monitored report, the number of individuals fell by 123,000 in the last month of 2020, the first month in a row since April. This followed an increase of 304,000 jobs revised in November. According to Bloomberg, consensus-based economists are expected to bring back 75,000 jobs in December.
The service sector has been hit hard again after a short postponement in recent months as stricter lock-in measures have been in place across the country since mid-November. The leisure and hospitality industry lost 58,000 payroll accounts in December, followed by a 50,000 decline in trade and transportation. The manufacturing industry also lost the payroll of 21,000 individuals in December, reversing the recent boom in the commodity-producing sector. Industries that saw net wage growth in December, including business services and education and health services, showed only modest growth.
“America’s great machine has hit the wall of growing coronavirus cases and state locks, threatening the full economic recovery from the recession,” said Chris Rupkey, financial economist at MUFG Union Bank on Wednesday morning. “The essence of any recession is the loss of jobs, and the year-end decline in jobs suggests a return to the dark days of the labor market last spring. A new government will return to Washington, and lawmakers will have their hands full as economic weakness returns.
ADP’s latest payroll report is two days ahead of the Ministry of Labor’s monthly payroll report, but due to differences in survey methodology, it was an unreliable predictor of government report results during the pandemic. For the ADP report, only individuals in active payroll are considered employed, while the Department of Labor counts all individuals who received payment for the report during the survey week.
In October, for example, ADP reported that the economy numbered only 403,900 individuals, while the Department of Labor counted 877,000. However, the underperformance of ADP was somewhat less dramatic in November.
But one theme has been consistent across virtually all of your recent jobs: Recruitment has weakened significantly in the last month of the year, and layoffs have rebounded. New weekly unemployment claims jumped to a three-month high in December, remaining at more than 800,000 a week for most of the month, while rising COVID-19 cases and cooler weather dragged employment away.
On Wednesday morning, the median economist continued to look for a modest increase in non-agricultural wage accounting in December in a job report from the Department of Labor, Bloomberg data show. But beyond the consensus estimate, many individual economists expected the Department of Labor to report on its first payroll in eight months, similar to the ADP printout.
At the end of the month, however, Congress passed a $ 900 billion stimulus package that included additional unemployment benefits as well as replenishment of Paycheck Protection Program (PPP) funds. The loans provided under the PPP are intended to help businesses across the country to employ their workforce, offering a life-saving opportunity for companies as they await widespread reopening as vaccine distribution expands.
“COVID-19 is likely to be a meaningful drag on the economy around the anniversary,” JPMorgan economist Bruce Kasman said in a recent note. “But now we see more momentum than we expected to start this weakening [with] fiscal policy support is arriving faster than previously thought. “
“Vaccines will continue to be used in the United States and we believe the combination of fiscal support and better control of COVID-19 will result in strong growth in mid-2021,” he added.
Emily McCormick is a reporter for Yahoo Finance. Follow him on Twitter: @emily_mcck
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