The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.
Today's jobs report shows that the labor market is starting off 2021 on unsure footing. The American economy added just 49,000 jobs in January, reversing a drop in December as the third wave of the pandemic waned. The improvement, however, is sluggish as the pandemic continues to restrain the economic recovery. While the economic recovery is rebooting, it's still coming off a cold start.
Recovery Rebooting after Pause
Payroll employment rose a modest 49,000 in January after a revised 227,000 job drop in December. While the rebound is an encouraging sign, a payroll gain of 49,000 would be considered weak even during normal times. Payrolls are still 9.8 million short of pre-crisis levels and adding only 49,000 jobs a month won't get us back to pre-pandemic levels at any reasonable pace. The economic recovery is rebooting, but it’s like starting a fire with wet tinder while the pandemic rages on.
Seasonal Adjustment Masks Even Worse Payroll Losses
The weak improvement in payrolls was largely due to smaller-than-expected seasonal layoffs. The number of Americans on payrolls, non-seasonally adjusted, is 2.77 million lower than in December. These seasonal layoffs should not be brushed off—the ongoing pandemic and economic crisis means that for these millions of laid-off Americans, jobs are scarce and UI benefits and savings may be exhausted. In a normal year, it would take until May for the labor market to make up for the Jan drop. Four months is a slog during normal times but a marathon during a pandemic.
Pandemic and Seasonal Effects Drove Industry Losses
Temporary help services saw the largest payroll gains in January with 80,9000 jobs added. By contrast, the end of the holiday season drove job losses in retail (-37,800 jobs) and transportation & warehousing (-27,800 jobs). Leisure & hospitality saw continued job losses (-61,000 jobs) as the pandemic's effects continue to be felt.
Unemployment Drops on Falling Temporary Layoffs
The unemployment rate dropped to 6.3 percent as temporary layoffs declined to 2.7 million from 3 million. While temporary layoffs receded, permanent layoffs rebounded to 3.5 million, though permanent layoffs have not changed much over the last few weeks in a sign that the recovery may be mitigating some long-term economic scarring.
Benchmark Revisions Pull 2019 Performance Down
Payroll employment in March 2020 was 250,000 jobs lower than previously reported, due to newly reported benchmark revisions. While this downward revision pales in comparison to the cliff that the economy drove off in the subsequent weeks, it does mean that 2019 annual job gains were only 2.011 million—the slowest pace since 2010.
The next few months will highlight the economic effects of the waning third wave of the pandemic. While the wave appears to be receding, the prospect of more transmissible variants may impede any return to normal. Congressional negotiations on additional relief are kicking off. While the impacts will depend on the exact contours of a deal, additional relief could go a long way toward keeping Americans afloat until vaccines are widely distributed.
The first jobs report of the new Biden administration shows a small step forward but we're still many yards from the finish line. The clock is ticking on the Biden administration's first 100 days. It may be the most important first 100 days in American history since FDR coined the term, as the country continues to battle the ongoing pandemic and economic crisis.
Overall, payrolls are still down 9.9 million from pre-crisis levels. Gains over the last three months have been barely noticeable as the third wave of the pandemic has taken its toll. Clearly, 49,000 monthly job gains are not enough to get us back to normal quickly.
On a non-seasonally adjusted basis, the economy lost 2,773,000 jobs. That should hopefully rebound in the coming months as the seasonal trend and reopening boost hiring, but the pandemic could put a damper on either of those effects.
Service industries took another blow from the pandemic with leisure & hospitality down 61,000 jobs in January. Retail trade (-37,800 jobs) and transportation & warehousing (-27,800 jobs) also saw large declines from the pandemic and end of the holiday season. Job gains were largely driven by professional and business services, but specifically, temporary help services (+80,900 jobs), indicating that January's job gains may not translate into stable, long-term gains.
The seasonal adjustment is also masking some large job losses by industry. For example, even the 80,900 jobs added, seasonally adjusted, in temporary help services is an illusion. The industry actually lost 183,500 jobs, non-seasonally adjusted, but that drop was just smaller than seasonally expected.
The unemployment rate resumed its decline in January, falling to 6.3%. Population adjustments by the Bureau of Labor Statistics mean December 2020 and January 2021 data is not strictly comparable, so we'll need to see a few more months of data to feel comfortable about the trend.
Temporary layoffs fell from 3 million to 2.7 million in January, a new intra-crisis low. Permanent layoffs rose slightly to 3.5 million, though remain below their 2020 peaks.
At the beginning of every year, the Bureau of Labor Statistics benchmarks the level of employment from the prior March, using slower but more accurate data. In today's report, March 2020 employment level was revised down by 250,000, which, unsurprisingly, is barely noticeable compared to the pandemic cliff.
The benchmark revisions mean that 2019 job gains were slower than originally reported at 2,011,000 jobs added. This was the slowest since 2010 when the economy was pulling out of the Great Recession, indicating that the labor market was slightly weaker than originally reported heading into the pandemic.