skip navigation

Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

ECONOMY
January 08, 2021

Shutdown-Imposed Job Losses Cancel Out Good Gains Elsewhere in December

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Private-sector employment declined by -93,000 in December, as job losses at sectors hit by newly re-imposed Covid-related shutdowns more than offset sizable gains elsewhere. The December job loss was itself offset by a +121,000 upward revision to the private-sector job count for November.

With the latest surge in Covid cases, shutdowns were reimposed on restaurants in much of the country. As a result, restaurant jobs declined by -372,000 in December. In addition, jobs declined by -103,000 at similarly affected theaters and recreation venues, and by -24,000 at lodging facilities.

Exhibit 1: Private-Sector Job Growth: Shutdown Sectors vs Others
Explore Private-Sector Job Growth: Shutdown Sectors vs Others.
Source: Bureau of Labor Statistics. 31 Dec 20. Select the image to expand the view.

In contrast, retailing added +121,000 jobs, construction +51,000 jobs, manufacturing +38,000 jobs, and health care +39,000 jobs. These sectors, obviously, were mostly unaffected by renewed shutdown orders.

Our take has been that while job growth—and economic growth in general—had been slowing in recent months from the spectacular pace of the summer, that was only to be expected as activity levels returned to nearly normal. This theme was largely repeated in December in those sectors not impeded by renewed shutdowns.

The manufacturing and construction gains continued the pace of steady recovery there. Similarly, while health care facilities had been shut down in March and April, they were generally not subject to the more recent strictures, and nice job gains there continued in December, along with a +33,000 revision to November job counts.

Retailing had been a disappointment last month, with retailing jobs declining -45,000 in November, and “control” retail sales then down -1.0%. This month’s data were more upbeat for retailing, with that sector gaining +121,000 jobs (+0.8%) and the November decline revised to -21,000. Perhaps the Christmas rush got started later in 2020 than was previously the case, which then got seasonally adjusted into a November decline. In any case, the strong December job gains in retailing (AFTER seasonal adjustment) augur for better December retail sales growth than some analysts have been projecting.

One can still debate whether the deep recession of spring 2020 was largely imposed by government shutdowns or was reflective of pandemic fears that would have restrained the economy even if it were left open. However, the December declines—and the lingering underutilization in various sectors—seem to reflect the “hand” of government-imposed shutdowns. That is, recovery continues in those areas where government is allowing it to, and in areas such as construction and manufacturing, activity has fully recovered—and then some—from the declines seen in March and April.

It may indeed be the case that renewed forcible shutdowns of restaurants and other facilities are necessary to prevent an even worse Covid spread than we have seen. However, the December job losses, where they have occurred, clearly indicate the magnitude of the economic costs offsetting the putative benefits of the shutdowns.

© Western Asset Management Company, LLC 2021. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.