The 49,000 jobs added reversed December losses, but were far below average monthly job creation enjoyed in the second half of 2020.
By Manuel Gutierrez, Consulting Economist to NKBA
Employment showed a very modest rebound last month with the addition of 49,000 new jobs. This compares with an average of 185,000 jobs added per month in the 10-year period ended in 2019.
Most of the job growth in January were in state and local government agencies, which added a combined 67,000 jobs, while Federal government employment shrunk by 24,000.
The private sector accounted for only 6,000 more jobs, negligible compared with the 360,000 jobs added per month in the preceding four-month period, even when December’s 227,000 job is included. January’s gains only recover about a fifth of those December losses. Figure 1 illustrates that job growth since June has consistently tailed off with each succeeding month.
The unemployment rate improved in January, falling by four-tenths of a point, from 6.7% in December to January’s 6.3% (Figure 2). Large strides have been made in reducing the unemployment rate since its 14.8% peak last April. Part of the improvement, however, is due to individuals leaving the labor force. When an unemployed person stops looking for a job, he or she is no longer counted as unemployed, which lowers the unemployment rate.
Although the rates among men and women each improved last month, women performed a bit better.
The rate for women is now 6.3%, 0.1% lower than that of men (Figure 2, right panel). In fact, over the last six years, as shown in the chart, unemployment among females has been equal to or lower than that of males 80% of the time.
Total employment of 142.6 million in January is still 9.6 million short of what it was a year ago. Despite expectations that the introduction of COVID-19 vaccines would help boost consumer confidence, it is very unlikely that employment will return to pre-pandemic levels within the next few years. Many businesses have been decimated, making a turnaround very difficult.
One factor is that businesses that face increasing demand for their products and need additional employees may be tentative and initially opt to increase work hours of existing staff. Since March 2020, the number of work hours per week has increased by nearly an hour, from 34.1 hours in March to 35 in January.
Even industries most affected by the pandemic, such as Retail and Hospitality/Leisure (Figure 3, right panel), have increased the number of hours of their current staff rather than add workers.
The biggest contributor to job growth in January was in the Professional Business Services area, which added 97,000 jobs for the month.
Excluding the government, the next highest sector was Educational Services, which includes private and public systems. It added 33,900 jobs.
The right side of the panel in Figure 2, which highlights sectors contributing to job losses, includeHospitality and Retail Trade, which were hardest hit by the pandemic and continue to suffer. They each lost nearly 38,000 employees for the month.
