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It seemed fitting that the jobs numbers for the final months of 2020 were as nasty as the year as a whole.
It is fair to say that the loss of 140,000 jobs in December indicates a reversal of the economic recovery that took place in the summer and fall. Other figures in Friday’s report confirm this fundamentally grim picture, such as the still depressed share of adults in the workforce. In the debate over which letter of the alphabet best describes the model of the 2020 economy, the numbers for December roughly exclude “V”.
But. But.
The details of this report, combined with everything that revolves around economic policy and financial markets, make it a more optimistic case. There is an opportunity for 2021 to be the year of a remarkable rebound, thanks to monetary and fiscal stimulus measures; the delayed effects of growth markets in recent months; and especially the prospect of a general vaccination against coronaviruses.
The December figures indicate a jobs crisis that is contained in sectors facing the direct effects of closures linked to a pandemic. Unlike the spring 2020 data, the latest figures are not consistent with the kind of widespread lack of demand in the economy that has made the recovery from recent recessions so long and slow.
The largest job losses in December were in leisure and hospitality, a sector that shed 498,000 jobs. Consider what that number represents: countless restaurants, hotels, performance venues and closed arenas; and hundreds of thousands of people back on the jobless lists and unsure when they can return to work.
The good news is, we know how and when these jobs can return. If enough Americans are vaccinated, they are likely to feel comfortable returning to normal leisure time habits. An outright boom in these sectors is plausible later this year. Americans’ economies are on the rise, and it’s easy to imagine pent-up demand for travel, concerts, etc.
Other sectors less directly affected by public health problems – industries that were in recession just a few months ago – have continued to improve. They are not necessarily back to pre-pandemic levels, but on track to get there for much longer.
Construction employment, for example, is still 3% below pre-pandemic levels, but the sector added 51,000 jobs in December. At this rate, he will regain his full health in the spring. The story is similar for manufacturing jobs, still down 4% from February, but adding 38,000 jobs in December.
The list of industries that fit this basic pattern – still at recession-compatible levels but rising steadily – is long and includes industries as diverse as truck transportation, real estate rental and leasing, and professional and commercial services.
Both the political and market environment are expected to create favorable winds for these sectors in 2021, helping them to regain full health more quickly.
A booming stock market does not translate into more economic activity overnight. But as business leaders craft their capital spending plans and consumers make their spending decisions, the stock surge tends to have a positive effect. This would imply that the positive effects of the new market highs over the past few weeks should start to show as public health concerns dissipate.
December’s jobs figures cover a period before Congress reaches a compromise pandemic aid package worth $ 900 billion. Among other things, the bill includes improved unemployment benefits that will help the hundreds of thousands of workers whose jobs disappeared in December, as well as $ 600 checks that are expected to bolster consumer spending in the months to come.
Plus, the Democratic victories in Georgia this week and the resulting Senate majority make those checks more likely to hit $ 2,000 per person. It also means that the Biden administration will have the flexibility to embark on a more ambitious program, including infrastructure spending, which should support overall economic activity.
A Democratic Congress is also likely to provide more aid to states, helping one of the other areas of job loss in December besides recreation and hospitality (state and local governments have cut 51,000 jobs last month).
Many could still go wrong, such as a prolonged mess in vaccine deployment or a market correction that is hurting business and consumer confidence. And none of this lessens the pain of the millions of Americans who are still out of work.
But all together, and more than at any other time since the start of the pandemic, the economy has clearly returned to health.
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