The employment report for December 2020 showed a loss of 140,000 jobs in December, the first decline since April, according to Friday's Employment Situation Summary from the Bureau of Labor Statistics. Professional and business services, leisure and hospitality, retail trade, and health care primarily drove small employment gains. At the same time, the headline unemployment rate improved slightly as the number of unemployed Americans dropped.
First American Deputy Chief Economist Odeta Kushi says the millions of people who are now considered long-term unemployed are more concerning than the headline number.
"Long-term unemployment last ballooned during the Great Recession, hovering around 40% of the overall jobless population from late 2009 into 2013, the highest in the series’ 73-year history,” she said.
The number of long-term unemployed (those jobless for 27 weeks or more) is practically unchanged relative to last month but accounts for 37% of total unemployed in December, Kushi pointed out.
Senior Economist at Realtor.com George Ratiu says a sustainable increase of new jobs and new construction is crucial to ensure a strong 2021 housing market.
"However, the economic divide created by the pandemic continues to be a problem," he said. "The silver lining is that there seems to be a light at the end of the tunnel. Looking ahead, with fiscal stimulus rolling into the economy, vaccines being distributed and interest rates at historically low levels, the divide between those with jobs and those without could begin to shrink.”
The unemployment report showed the effects of the recent resurgence in the COVID-19 pandemic, according to Fannie Mae's Chief Economist Doug Duncan.
"Data from the household survey were slightly less pessimistic," he added, before outlining other aspects of the study:
"The unemployment rate and labor force participation rate both stayed constant at 6.7% and 61.5%, respectively, in December. The number of people on temporary layoff, which had been declining, rose by 277,000 last month, and the number of people experiencing a permanent layoff fell by 348,000. Furthermore, the number of persons who were working part time but who would prefer full time employment decreased by 471,000 in December, and the U-6, the broadest measure of labor underutilization, fell by three-tenths to 11.7, both positive signs for labor demand."
Explaining how the unemployment rate has shifted over past months, Raitu said that it dropped in November, and the number of jobs on company payrolls increased. However, the gain slowed again and there are still fewer jobs now than there were in February of 2020.
"As a whole, the economy quickly bounced back earlier this year. Stimulus programs that helped bridge income and revenue losses were key to preventing a sustained economic collapse. However, as the pandemic disruptions stretch longer than expected, it's clear that additional stimulus is needed—something both Fed Chair Powell and Treasury Secretary Mnuchin urged in testimony to Congress this week. Looking ahead, without additional help, economic performance could stall, and that loss of momentum would likely impact previously resilient industries, such as housing."
Kushi says the potential implication of the worsening situation could be "permanent economic scarring and prolonged recovery." There could be some light at the end of the tunnel, though, she added.
"A rollout of successful vaccines in 2021 may help some of the hardest-hit sectors—airlines, hospitality, retail—recover, providing a real boost to the labor market, with faster growth skewed to the services sector. However, it will likely take years to regain all the jobs lost.”
Raitu added that housing remains a bright spot, as we enter 2021.
"Residential construction jobs increased nearly 1.1% in December relative to November and are now .8% above their pre-pandemic levels in February. Increasing the number of construction workers is critically important to alleviating the labor shortage challenge and the gap between household formation and homebuilding. More hammers, more homes."