By Josh Mitchell
The nation's labor-market recovery stalled in December, as a resurgence of the coronavirus and state-imposed restrictions ended seven months of job growth.
Employers cut 140,000 jobs last month, the first decline since the pandemic hit the country last spring, the Labor Department said Friday. The jobless rate held steady at 6.7%, far below its April peak of 14.8% -- a post-World War II high -- but still almost twice its pre-pandemic level.
Restaurants and bars drove last month's decline. Forced to close or scale down because of the virus and cold weather, they cut 372,000 jobs. Other industries highly vulnerable to the spread of virus -- hotels, museums, tourist sites -- laid off workers, as did government agencies and schools.
Most other sectors added jobs last month, but the gains weren't enough to offset the sharp decline in areas sensitive to the state of the pandemic.
"We have one sector in particular that is undergoing some extreme difficulties right now," said economist Gus Faucher of PNC Financial Services. "The rest of the economy looks pretty solid."
The December decline came as stimulus from a roughly $900 billion coronavirus aid package kicked in, providing $600 stimulus checks for most families and a $300-per-week increase in unemployment benefits for jobless workers. President-elect Joe Biden on Friday said next week he would be "laying out the groundwork" for another relief package. Democrats will control the White House and both chambers of Congress later in January.
"The bottom line is the jobs report shows we need to provide more immediate relief for working families and businesses -- now," Mr. Biden said. He also said he would seek to increase the federal minimum wage to at least $15 an hour, calling on Congress to pass the measure.
U.S. stocks fell following the report as investors looked ahead to the possibility of additional stimulus.
Job growth had snapped back quickly in the summer but slowed every month since June. Economists believe last month's drop will be temporary and growth will come back quickly with the government aid and as more Americans get the Covid vaccine.
The December figures capped the worst year of job losses on record. The U.S. economy shed 9.4 million jobs last year, the most in any year since records began in 1939 and nearly double the 5 million lost during 2009, after the housing crash.
As of December, employment remained down by nearly 10 million compared with February, just before the pandemic hit.
Employers like Argie Karafotias are eager to hire again. Last spring, he closed his brunch and catering spot, the Golden Brunch, in Arlington Heights, Ill. as the pandemic spread and state leaders ordered businesses to shut down. As the restrictions lifted in late spring he reopened. Sales boomed 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."
"If we close again," he added, "we're going to close for good."
Last month's job loss came almost entirely in hospitality and leisure industries -- including restaurants and hotels -- which lost 498,000 jobs.
Other industries added jobs, including retailers, factories and construction companies. Retailers added 121,000 jobs in December, which may have reflected consumers stepping up spending for the holidays.
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.
The pandemic and related restrictions led to 22 million job losses in March and April; about 12 million have been recovered since then.
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 June. 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 the new aid package was signed into law at the end of December.
As households receive that money many could boost spending, which would prompt businesses to hire workers to meet the demand.
Factories added 38,000 jobs last month, responding to higher demand for goods as households shift from spending money 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. 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.
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 said 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 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."
Ken Thomas contributed to this article.
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
01-08-21 1520ET
