Employment growth returned to the US in January. The number of non-farm workers rose by 49,000 while the unemployment rate fell to 6.3%, the Labor Department said in the Biden government’s first employment report on Friday.
Economists polled by Dow Jones had targeted growth of 50,000 and unchanged unemployment of 6.7%. However, many analysts on Wall Street had been looking for higher numbers. Citigroup had forecast a profit of 250,000.
The soft report did not detract from the markets as stocks opened positively and longer-term government bond yields rose.
The sharp fall in unemployment was due to the fact that the labor force participation rate fell to 61.4% and 406,000 workers left the labor force. However, a broader measure of unemployment, which includes discouraged workers and part-time workers for economic reasons, also fell, falling to 11.1% from 11.7% in December.
“While we gained jobs after losing in December in January, this is not a report we turned the corner,” said Robert Frick, corporate economist with Navy Federal Credit Union. “We should especially not comfort ourselves that the unemployment rate has fallen dramatically, largely as more Americans have left the workforce.”
While the employment picture remains challenging, 2021 saw a return to earnings after a month-long hiatus in December that saw the first negative number since the rebound began in May.
Just over 10 million remain unemployed, 4.3 million more than a year ago, although the number fell by 606,000 in January. Companies cut jobs in March and April to tackle the Covid-19 pandemic and most sectors remain below their pre-pandemic levels.
The damage has been particularly acute in the hospitality industry as governments across the country have forced hotels, bars and restaurants to either close or operate at reduced capacity to stop the spread of the coronavirus.
The hospitality industry lost another 61,000 jobs in the months after suffering a revised downward exodus of 536,000 in December.
Overall, December numbers were worse than originally reported, with the month posting a loss of 227,000 from the original estimate of 140,000. November profits have also been revised significantly from 266,000 to 264,000.
Employment gains in January were concentrated in employment and professional services (97,000) and local government training (49,000). Wholesale increased 14,000 while mining increased 9,000.
Retail also saw a 38,000 decline after adding 135,000 during the December shopping season, while healthcare also lost 30,000 jobs. Since February, the last month before the pandemic, the sector has declined 383,000.
Those reported as temporarily laid off fell to 2.7 million, although permanent job losers have barely changed at 3.5 million. Long-term unemployment has also changed little, at 4 million, while those who were out of work for less than five weeks fell to 2.3 million.
Vaccines have given hope that the US economy can run at full speed in the second half of the year, although the months ahead are likely to remain challenging. Gross domestic product contracted 3.5% in 2020 and the outlook for the first quarter, particularly 2021, remains uncertain. Most economic numbers have exceeded expectations, but concerns remain that the virus’s persistence could hurt economic activity earlier in the year.
President Joe Biden’s administration has pushed through a $ 1.9 trillion bailout package that includes direct payments to Americans and improved unemployment benefits. While the Republicans have offered a competing proposal for more modes, the Democrats stand ready to approve the more expensive plan even without GOP support.
Correction: In an earlier version, the first reading of the December job report was incorrectly stated.