By Josh Mitchell
The U.S. shed 140,000 jobs in December as a resurgence of the coronavirus ended seven months of job growth and weakened the recovery.
Restaurants and bars drove the decline by cutting 372,000 jobs last month, the Labor Department said Friday. The broader category of hospitality and leisure industries -- which adds hotels, museums, tourist sites -- also saw losses, while schools and governments cut jobs as the pandemic triggered new restrictions on activity.
Jobs gains in most other industries weren't enough to offset the sharp decline in areas sensitive to the state of the pandemic.
The U.S. jobless rate held steady at 6.7%, far below its April peak of 14.8% but still almost twice its pre-pandemic level.
"The labor market ended the year on a sour note," Greg Daco, chief U.S. economist at Oxford Economics, said in a note to clients.
The report showed a bifurcated economy. Last month's job loss came almost entirely from one sector: hospitality and leisure lost 498,000 jobs. After a new surge in virus infections, food establishments were forced to close or scale back hours by states and local governments and by cold weather, which prevented them from hosting patrons outside.
Other industries added jobs last month, including retailers, factories and construction firms. Retailers added 121,000 jobs in December, which may have reflected consumers stepping up spending for the holidays.
Economists believe a new period of job losses will be temporary, though they differ on how long it will last. Some say that if virus infections peak soon, as expected, and if businesses reopen as more people get vaccinated, restaurants and other businesses could rehire quickly this spring.
"With employment in most other sectors rising strongly, the economy appears to be carrying more momentum into 2021 than we had thought," Michael Pearce, senior U.S. economist at Capital Economics, said in a note to clients.
Overall job growth in November was stronger than previously estimated. The economy added 336,000 jobs that month instead of the initially reported 245,000.
Meanwhile, the record surge in the unemployment rate last spring due to the pandemic was slightly higher than previously reported, according to a routine recalculation of long-term trends. The jobless rate hit 14.8% in April, the highest on record, instead of the previously reported 14.7%, Friday's report showed.
It also confirmed that 2020 was the worst year of job loss on records that began in 1939. Last year's job loss of 9.4 million eclipsed the 5 million jobs lost in 2009, during the recession caused by the housing crash.
The pandemic and related restrictions led to 22 million job losses in March and April; about 12 million have been recovered since then. As of December employment remained 9.8 million below February's level.
After the sharp contraction in March and April, the labor market snapped to life quickly, adding a total 9.3 million jobs in May through July. Job growth eased each month after that and was halted altogether in December.
"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.
There are at least three main factors behind the jobs 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. Second, the onset of cold weather has limited the ability of businesses, particularly restaurants, to continue to host patrons outdoors. Third, 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 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. And the vaccination process is under way.
As households receive that money many could boost spending, which would prompt businesses to hire workers to meet the demand.
Factories appear to be doing well as households shift from spending money on vacations and other services to buying sofas, cars and other products. Healthcare manufacturers are hiring workers to help make the Covid-19 vaccines. Catalent Inc., based in New Jersey, is dangling $3,000 signing bonuses as it hopes to fill hundreds of jobs.
But manufacturing represents only about 14% of the labor market. The vast majority of 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. this spring because of the pandemic. It reopened last spring and 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, Illinois, 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 phone 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.
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
01-08-21 1059ET
