February 05, 2021
Trump is the first president to leave office with a loss of jobs since Herbert Hoover.
The unemployment rate fell by 0.4 percentage points in January to 6.3 percent. Much of this decline was due to people leaving the labor market as the employment-to-population ratio (EPOP) only rose by 0.1 percentage point. The EPOP now stands at 57.5 percent, 3.6 percentage points below its year-ago level.
The establishment survey showed an increase of just 49,000 jobs, with the private sector only accounting for 6,000 of these jobs. There were sharp downward revisions to job growth for both November and December, so the level of private sector jobs reported for January was 198,000 below the November level.
The January employment level left the economy with 2,981,000 fewer jobs than when President Trump took office. This makes him the first president to leave office with a loss of jobs since Herbert Hoover.
The household survey continues to show unusual patterns among the unemployed. Long-term unemployment (more than 26 weeks) accounts for an extraordinary 39.5 percent of the unemployed. While the peaks in the Great Recession were higher, hitting 45.5 percent in April of 2010, in prior recessions the share of long-term unemployed typically peaked not much over 20 percent.
This indicates that many of the people who lost their jobs in the original shutdowns at the start of the pandemic still have not found new employment. In prior recessions, even severe ones, people tended to experience shorter spells of unemployment and then find new jobs.
On the positive side, there is an extraordinarily high share of the unemployed who report being on temporary layoffs. This stood at 27.0 percent in January, it peaked at 14.5 percent in the Great Recession. This could mean that many of the unemployed will quickly return to their former jobs once the pandemic is controlled.
Another extraordinary feature is the small share of unemployment due to voluntary quits. This stands at just 6.4 percent, indicating people see their labor market prospects as grim. When the overall unemployment rate was at the same level in 2014, voluntary quits accounted for 8.9 percent of unemployment.
Among various demographic groups there was a 0.7 percentage point drop in the unemployment rate for Blacks, but this still stood at 9.2 percent. This was most due to a decline of 1.0 percentage point in the unemployment rate for Black men to 9.4 percent, as the rate for Black women edged up 0.1 percentage point to 8.5 percent. The reported rate for Black teens fell by 7.9 percentage points to 17.3 percent, but this was just reversing an almost identical increase reported for December.
The unemployment rate for Asian Americans rose by 0.7 percentage point to 6.6 percent, so it now is higher than the 5.7 percent rate for whites, reversing the normal pattern. There was a 0.7 percentage point drop in the unemployment rate for Hispanic to 8.6 percent, but this followed a rise of 0.9 percentage point reported in December.
On the establishment side, state and local education were the big job gainers, adding a total of 85,500 jobs, presumably associated with a return in class instruction. Outside of education, state and local governments shed 19,000 jobs.
Construction and manufacturing both lost jobs in January, reversing their pattern of healthy job growth since May. The sectors lost 3,000 and 10,000 jobs, respectively. Manufacturing employment in January was 150,000 below the level when Donald Trump took office. Coal mining added 300 jobs in January, but employment in the sector was still down 8,500 jobs from when Trump took office.
The retail sector lost 37,800 jobs in the month, all of it due to job loss in general merchandise stores and electronic and appliance stores. The former partially reversed a sharp gain reported for December, which likely reflects unusual seasonal patterns.
Hotels and restaurants shed 37,700 jobs in January after a loss of 433,700 jobs in December. This is due to the resurgence of the pandemic. Health care lost 29,600 jobs. Nursing and residential care facilities drove this drop with a decline of 31,000 jobs. Employment in the sector is down 305,400 from the year-ago level.
On the plus side, the relatively high-paying professional and technical services sector added 40,100 jobs after adding 60,700 jobs in December. The temp sector added 80,900 jobs, bringing its gain over the last four months to 305,400 jobs.
Wage growth looks surprisingly healthy. The annualized rate of growth comparing the last three months (November, December, January) with the prior three months (August, September, October) was 4.5 percent. Some of this is due to composition effects as the loss of low-paying restaurant jobs boosted the average, but even taking out 0.5 percentage point, it still leaves a very healthy growth rate.
Another notable item is an increase of 0.3 hours in the length of the average workweek. It now stands 0.7 hours above the year-ago level. This goes opposite the usual pattern where hours usually fall in a recession. This means both more unemployment than would otherwise be the case, and that most workers are not sharing the pain.
This is a very mixed report. The private sector has been very hard hit by the resurgence of the pandemic in the last two months, although the effects are heavily concentrated in a small group of industries. Nonetheless, the sectors that had shown strength, especially construction and manufacturing, weakened in January. That is serious grounds for concern.