It seemed fitting that the number of jobs for the last months of 2020 would be as nasty as the year as a whole.
It is fair to say that the loss of 140,000 jobs in December indicates a decline in the economic recovery that took place in the summer and fall. Other numbers in Friday’s report confirm the basic bleak picture, such as the persistently depressed share of adults in the workforce. In the debate over which letter of the alphabet best describes the pattern of the 2020 economy, the December numbers include ‘V.’ virtually out.
But. But.
The details of this report, combined with everything revolving around economic policy and the financial markets, make for a more optimistic case. There is an opportunity for 2021 to be the year of a remarkable setback, thanks to monetary and fiscal stimulus; the delayed effects of vibrant markets over the past few months; and above all the prospect of widespread coronavirus vaccination.
The December figures point to a crisis in jobs covered in sectors dealing with the immediate consequences of pandemic-related downturn. Contrary to the data of the spring of 2020, the latest figures do not correspond to the kind of broad lack of demand in the economy that caused the recovery of the last few recessions to be so long and so slow.
The biggest job losses in December were in leisure and hospitality, a sector that lost 498,000 jobs. Think of what the number represents: countless restaurants, hotels and performance stages and arenas; and hundreds of thousands of people who are unemployed again and are unsure about when they can start working again.
The good news is that we know how and when those posts can come back. If enough Americans are vaccinated, they will likely feel comfortable returning to normal patterns of relaxation. A direct boom in those sectors is likely later this year. Americans’ savings are through the roof, and it’s easy to imagine a demand for travel, concerts, and the like.
Other sectors less directly affected by public health problems – industries that were at a recession just a few months ago have continued to improve. They are not necessarily back to pre-pandemic levels, but on course to get there much longer.
Construction employment, for example, is still 3 percent below its pre-pandemic levels, but the sector added 51,000 jobs in December. At that rate, it will be back to full health in the spring. The story is similar to manufacturing work, with 4 percent lower than in February, but in December he added 38,000 jobs.
The list of sectors that fit the basic pattern – are still at a level similar to a recession but returning slowly – are industries as diverse as truck transport, real estate rental and leasing, and professional and business services.
Both the policy and the market environment should create headwinds for those sectors by 2021, which will help them return to full health faster.
A thriving stock market does not translate into more economic activity overnight. But as corporate executives make their capital spending plans and as consumers make their spending decisions, rising stocks have a positive effect. This would imply that the positive effects of the new highs should start to appear in the last few weeks as the health concerns arise.
The number of jobs in December covers a period before Congress reaches a $ 900 billion compromise aid package. The bill includes increased unemployment benefits that will help the hundreds of thousands of workers whose jobs disappeared in December, as well as $ 600 checks that should boost consumer spending in the coming months.
On top of that, the Democratic victories in Georgia this week and the resulting majority in the Senate make it more likely that the checks will grow to $ 2,000 per person. It also means that the Biden administration will have the flexibility to undertake a more ambitious agenda, including infrastructure spending, which should support overall economic activity.
A Democratic Congress is also likely to provide more aid to states and in December help one of the other areas of job loss besides recreation and hospitality (state and local governments cut 51,000 jobs last month).
Many can still go wrong, such as a prolonged mess of vaccine vaccination or a market correction that harms business and consumer confidence. And none of this reduces the pain of the millions of Americans who are still out of work.
But put it all together, and more than at any point since the start of the pandemic, the economy has a clear path to full health.