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The U.S. private sector unexpectedly cut jobs in December as employment trends weakened sharply across the country before Congress passed its latest virus program.
The private payroll fell by 123,000 in the last month of 2020, according to ADP’s closely watched report, marking the first monthly drop since April. This followed a revised increase of 304,000 jobs in November. Consensus economists expected 75,000 jobs to return in December, according to Bloomberg data.
The service sector has been hit hard again after a brief reprieve in recent months, as more stringent lockdown measures returned in force across the country from mid-November. The leisure and hospitality industries lost 58,000 payrolls in December, followed closely by the commerce and transportation industries, with a decline of 50,000. Manufacturing industries also lost 21,000 private payrolls. in December, ending part of the recent recovery in the goods-producing sector. Industries that posted net payroll gains in December – including business services, education and health services – posted only modest increases.
“The great American jobs machine has hit a wall of rising coronavirus cases and state lockdowns, putting the entire economic recovery after the recession at risk,” said Chris Rupkey, chief financial economist of MUFG Union Bank, in an email Wednesday morning. “The heart of every recession is job losses and, right now, declining jobs at the end of the year suggests that the dark labor market days of last spring have returned. A new government returns to Washington and lawmakers will have their hands full as economic weakness appears to have returned.
ADP’s latest payroll report precedes the Labor Department’s monthly two-day payroll report, but it has been an unreliable predictor of the government’s report results during the pandemic due to differences in survey methodology. With the ADP report, only people on an active payroll are counted as employees, while the Labor Department counts anyone who received a paycheck during the week of the survey for the report.
In October, for example, ADP reported that the economy had earned just 403,900 private payrolls, while the Department of Labor reported an increase of 877,000 people. ADP’s undershoot was slightly less dramatic in November, however.
But one theme has been constant in virtually all recent employment data: hiring has weakened especially in the last month of the year and layoffs have resumed. New weekly jobless claims hit a three-month high in December and remained high at over 800,000 per week for most of the month as rising COVID-19 cases and colder weather slowed employment .
As of Wednesday morning, the median economist was still looking for non-farm payrolls to increase slightly in December in the Department of Labor’s employment report, according to Bloomberg data. But outside of the consensus estimate, a number of economists predicted the Labor Department would report its first payroll cut in eight months, similar to ADP’s impression.
However, at the end of the month, Congress passed a $ 900 billion stimulus package, which included additional unemployment benefits as well as a replenishment of Paycheck Protection Program (PPP) funds. The loans under the PPP are intended to help businesses across the country keep their workforces employed, offering a lifeline for businesses as they wait for a widespread reopening once vaccine distribution is over. enlarged.
“COVID-19 will likely be a significant drag on the economy at the turn of the year,” JPMorgan economist Bruce Kasman said in a recent memo. “But we are now seeing more momentum than we anticipated as this weakening approached. [with] support for fiscal policy is coming faster than we expected. “
“Vaccines continue to be deployed in the United States and we believe the combination of fiscal support and better control of COVID-19 will generate strong growth in mid-2021,” he added.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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