All Posts Tagged: economic recovery

Coronavirus Sends Labor Market Recovery Into Reverse

Scott Anderson
Chief Economist

The December Employment Report was as bad as feared, and worse than most economist forecasts, showing a net loss of 140k non-farm jobs in December.

This was a sharp break from November’s performance when the U.S. economy created a solid and upwardly revised 336k jobs.

The unemployment rate held at an elevated 6.7% in December, but another 115k people left the labor force to keep it at that elevated level – so not really great news all-in-all.

The coronavirus resurgence, new business restrictions, and new stay-at-home orders were the primary drivers of the sudden reversal in the labor market recovery in December, as big states like California went back into full lockdown. The leisure and hospitality industry alone lost 498k jobs last month, the first net job decline in this sector since May. Employment in the leisure and hospitality sector was still a stunning 3,908,000 below pre-pandemic levels at the end of the year.

Beyond leisure and hospitality, job growth weakened or reversed in a number of important categories like government (-45k), education and health care (-31k), information (-1k), and financial services (+12k).  Nearly all the new labor market weakness came from the services side of the economy, while the goods production side of the economy continued to ramp up employment.

Construction added 51k jobs and manufacturing added another 38k jobs last month. Respectable job growth continued in trade and transportation (+191k) and temporary help employment (+68k) in December as well. The silver lining here is that once the pandemic resurgence begins to ebb, services businesses like those in the leisure and hospitality business will be able to reopen and rehire, while pent-up demand from consumers that have had to stay away for more than a year now should help turbo charge that reopening by the third quarter of 2021.

Another positive trend and reason for optimism that the U.S. economic recovery could quickly resume is the strong income gains from those that continue to hold onto their jobs. Average weekly earnings growth of private employees jumped back up to 6.3% in December. Prior to the pandemic this weekly earnings growth was closer to 2.2%. Despite 10.7 million unemployed people in the United States in December, a large percentage of the workforce is still managing just fine through this pandemic.

Bottom-line, the December jobs report is a wake-up call that recovery from this pandemic will not necessarily occur in a straight line. There is still catastrophic demand destruction in many important sectors of our economy that have the potential to turn into permanent economic and financial scars. At the same time, state and local governments remain under tremendous budgetary pressure and will continue laying off workers well into 2021 and beyond.

On the glass half-full side, the extent of the job losses from recent business restrictions and stay-at-home orders have been far less than what we saw in March of 2020, suggesting that many businesses are learning how to cope with this new pandemic economic environment. The negative economic shock should remain limited compared to the second quarter of last year, and the additional $900 billion in pandemic relief should go a long way in ensuring it stays that way.

To learn more, check out this week’s U.S. Outlook Report.

 

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Deteriorating Fundamentals vs. Rising Expectations

Scott Anderson
Chief Economist

Over the near-term, U.S. economic growth fundamentals look set to deteriorate. Yet U.S. stock prices remain close to record highs and long-term Treasury yields have moved up 10 to 15 basis points in the last week alone on prospects for sizable fiscal stimulus and a new Democratic administration. The markets are clearly trying to look past near-term signs of trouble, while focusing on a brighter 2021. 

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Consumer Spending Rebound at a Crossroads

Scott Anderson
Chief Economist

In many ways the consumer is the U.S. economy.

Real consumer spending comprises about 70% of U.S. GDP, so if you can accurately forecast where the consumer is going, you have a pretty good idea the rest of the U.S. economy will follow. Personal consumption expenditures is a broad measure of consumer spending, including spending categories not included in the monthly retail sales reports like spending on services like health care and education.

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Consumers Spending Like There Is No Tomorrow

Scott Anderson
Chief Economist

U.S. economic data continues to surprise on the upside through July.

The retail sales report for July reveals a remarkable rebound in retail sales has occurred over the last three months as the U.S. economy reopened for business and government transfer payments bolstered consumer confidence enough for consumers to return to stores with a vengeance.

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Bye Bye Supplemental Unemployment Benefits

Scott Anderson
Chief Economist

We received more confirmation this week that consumer spending bounced back strongly from its April lows. The $1,200 checks that were sent by the Federal Government to individuals certainly helped create the conditions for this reopening spending revival, but I would argue that expanded and supplemented unemployment insurance benefits have been much more targeted and effective in maintaining spending among the most vulnerable households.

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