U.S. Jobs Report to Show Extent of Winter Slowdown

By Josh Mitchell

The U.S. jobs report for December will show the extent of a winter labor-market slowdown, offering insight about the economic recovery's vitality.

Job growth has slowed in recent months as cold weather, rising Covid-19 infections, and new restrictions on businesses deal a setback to the recovery from the pandemic. Friday's report is expected to show that job growth slowed considerably in December, which would extend a slowdown that began last summer.

Estimates of how the labor market performed at the end of what was surely the country's worst year of job loss on record vary widely. The pandemic and related restrictions led to 22 million job losses in March and April; 12 million have been recovered since then. Economists believe employers added 50,000 jobs last month and that the unemployment rate rose by tenth of a percentage point to 6.8%, according to the median estimate of a Wall Street Journal poll.

Some economists believe the economy lost jobs, which would end seven months of gains. Others believe employers added 200,000 jobs or more.

Any of those cases would suggest the recovery continues to lose momentum. After the sharp contraction in March and April, the labor market quickly snapped back to life, adding a total 9.3 million jobs over the next three months. Since then, job growth has eased each month.

Economists think growth came close to stalling in December, but that it will pick up again later this year.

"It's reasonably hopeful this will be a one-off rough patch and we'll recover from there," Pooja Sriram, U.S. economist at Barclays, said.

At least three main factors are behind the slowdown. A resurgence in coronavirus infections has caused states and cities to impose new restrictions on businesses, such as earlier curfews and business closures, and caused some consumers to stay indoors. The onset of cold weather has limited the ability of businesses, particularly restaurants, to continue to host patrons outdoors. And earlier efforts by Congress and states to aid businesses--such as stimulus checks and additional unemployment compensation--faded before a new aid package was signed into law at the end of December.

The silver lining is that economists believe the lull will be temporary. The process of distributing vaccines is under way. The roughly $900 billion aid plan is providing stimulus checks of up to $600 for most families, a $300-per-week boost in unemployment benefits for laid-off workers and a new round of aid for businesses. President-elect Joe Biden, a Democrat who takes office Jan. 20, has said he wants to provide more relief for households, and his party will control both chambers of Congress after the Senate elections in Georgia.

As households receive that money, many could boost spending, which would prompt businesses to hire workers to meet the demand.

Friday's report could show a divide between industries that produce goods and those that offer services. Factories appear to be doing well as households shift from spending on vacations and other services to buying sofas, cars and other products. Health-care manufacturers are hiring workers to help make the Covid-19 vaccines. New Jersey-based Catalent Inc., which is working with Moderna Inc. on the packaging and distribution of its vaccine, is dangling $3,000 signing bonuses as it hopes to fill hundreds of jobs.

But manufacturing represents only about 14% of the labor market. Most jobs are in services. Industries tied to in-person sales or interaction continue to struggle. Those include restaurants, hotels, music venues, and amusement parks.

Argie Karafotias had to close his restaurant, Golden Brunch, in Arlington Heights, Ill., last spring because of the pandemic. When they reopened, they saw a bump in sales over the summer as local residents rallied to help small businesses like his. Many also had cash to spend because of the enhanced jobless benefits and stimulus money, he said. But this winter, business has slowed.

He employs 14 people, down from 30 before the pandemic. He has held off on hiring because he doesn't know if his business can survive for long. "I put in more hours for myself," instead of hiring another cook and a server, he said. "I don't have a host. I'm doing most of the work being the host. I cannot afford extra employees."

Tasty Spin, a Mediterranean fast-food restaurant in the nearby town of Buffalo Grove, Ill., has seen a decent pickup in business in recent months after co-owner Jessica Al Habahbeh advertised on Facebook warning the business would close if people didn't stop by. She has been trying to hire drivers to deliver rather than rely on food-delivery apps.

"We need additional workers and the people who apply for the opportunity don't show up," Ms. Al Habahbeh said. She suspects that is because they are earning enough on unemployment compensation that they would make less money driving for her. "We've had people come to us and offer to work for us at a lower rate in cash so that they can have extra money on the side and still get their unemployment," she said. "We can't do that--that's illegal."

Retailers also may have hired less in December. Many consumers normally boost spending at the end of the year as they buy holiday gifts. But this time, many may have bought gifts earlier in the year to take advantage of heavy discounting by retailers--and they did so online, rather than in the store.

Friday's report is likely to show that 2020 was the worst year of job loss since records began in 1939. Last year's job loss will likely eclipse, by far, the 5 million jobs lost in 2009, during the recession caused by the housing crash.

Write to Josh Mitchell at [e-mail]

(END) Dow Jones Newswires

01-08-21 0544ET