PREVIEW: What to Look for in the January Jobs Report

February 02, 2021

(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, February 5th at 8:30 AM Eastern Time.)

The continued surge in coronavirus cases will again be the main story in the January employment report. We will likely again see a fall in overall employment driven by job loss in restaurants and other areas heavily affected by the pandemic. The relief package passed in December may have been a small positive, but for the most part, checks did not arrive in time to affect the employment situation much in the month.

Trump’s Last Jobs Report Will Probably Show His Presidency Was a Job Loser
This is the last jobs report of the Trump presidency. The reference period was the week that includes January 12. The economy generally adds jobs, except in recessions. Even with a downturn, the job growth in the years before or after the recession generally means positive job growth in a president’s term in office. As of December, total employment during Donald Trump’s term of office was down by just over 3 million. This means that he is virtually certain to be the first president since Herbert Hoover to leave office with fewer jobs than when he came in.

Temporary Layoffs
An extraordinarily high percentage of the unemployed have reported being on temporary layoffs throughout the recession. This figure stood at 28.4 percent in December, up from 25.9 percent in November. By comparison, in prior recessions the peaks were in the high teens or low twenties.

Layoffs in January will probably push up the unemployment rate. If that is the case, hopefully the share saying they are on temporary layoffs will rise further, indicating that many of the newly unemployed are likely to get their jobs back when the risk from the pandemic lessens. 

Long-Term Unemployment
Long-term unemployment (more than 26 weeks) rose quickly in this recession and remains extraordinarily high. This is a problem since workers who are unemployed for more than 26 weeks have historically had more difficulty getting reemployed and often see sharp wage reductions when they do.

The percentage of unemployment in this category will likely fall in January if there is a rise in unemployment due to new layoffs. Still, the number of long-term unemployed is likely to increase. Since many of the long-term unemployed drop out of the labor market, we may also see some reduction in the labor force participation rate. This is down by 2.0 percentage points for women over the last year and 1.8 percentage points for men.

The extraordinarily high share of long-term unemployment means that the pain in this recession has been highly concentrated. Rather than a large number of people seeing short spells of unemployment, a smaller group of people have been unemployed for much of the recession.

Wage Growth
As has been widely noted, wage growth data were distorted by composition effects in the shutdown months and the immediate bounce back in July and August. Now that we are seeing more normal rates of job growth, trends in the average hourly wage are again being driven primarily by actual wage increases rather than changes in the mix of workers.

Average hourly wage growth seems to be proceeding at a respectable pace so far in the recovery. The annual rate of growth for the private sector as a whole was 2.8 percent, comparing the last three months (October, November, December) with the prior three months. This is down somewhat from the pre-pandemic pace, which was slightly over 3.0 percent. However, with inflation near 1.5 percent, it still implies healthy real wage growth.

Wage growth slowed more sharply in the hard-hit leisure and hospitality sector, averaging just 1.6 percent over the same period. Before the recession, wages in the sector had been rising somewhat more rapidly for the private sector as a whole.

Weekly Hours
In keeping with concentrated pain incurred by the long-term unemployed, average weekly hours have not declined in this recession. In a typical recession, part of the reduced demand for labor is met by a reduction in hours rather than layoffs. At the trough of the Great Recession, the average workweek was 1.5 hours shorter than the pre-recession level. By contrast, the average workweek was 0.4 hours longer in December than it had been a year ago.

While part of this increase is compositional — the sectors employing the most part-time workers have been hardest hit — we can see the same story within sectors. If we see more layoffs in January in the sectors most sensitive to the pandemic, it will be important to see if the layoffs are accompanied by a reduction in average hours in these sectors.

The fact that so much of the unemployment has been long-term and that average hours have not dropped reinforces the reality that the pain from this recession has been highly concentrated.

Jobs in Construction and Manufacturing
While large sectors of the economy are hurting due to the pandemic, construction and manufacturing, which traditionally are hard hit in a recession, are doing relatively well. Both have been seeing strong job growth in recent months. This is likely to continue into January.

State and Local Government  
The state and local government sectors have already shed more than 1.3 million jobs from their pre-pandemic level. These governments continue to face serious pandemic-related budget shortfalls, with little help from the federal government. We are likely to see more job loss in January. If the federal government does not come through with additional aid, these sectors will likely continue to shed jobs through 2021.

Asian American Unemployment Rate
Typically, the unemployment rate for Asian Americans has been slightly lower than the unemployment rate for whites. In this recession it has been running somewhat higher than the white unemployment. However, the gap recently closed, with the unemployment rate for Asian Americans actually 0.1 percentage point lower than for whites in December. This relatively high rate for Asian Americans likely reflected a larger share being employed in small businesses that have been hard hit by the pandemic. If we do see more layoffs in the pandemic sensitive sectors, we may see the unemployment rate for Asian Americans again rise above the unemployment rate for whites.

CEPR produces same-day analyses of government data on inflation, employment, GDP and other topics. 
Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.

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