After a brutal close to 2020, the United States labour market took a turn in the right direction in January, but there is still a long, long way to go before it recaptures its pre-pandemic strength.
The US economy added 49,000 jobs in January, while the unemployment rate edged down to 6.3 percent, the US Department of Labor said on Friday.
The uptick in non-farm payrolls is a welcome development after the economy shed a revised 227,000 jobs in December.
But the modest clawback of job losses underscores how much ground the economy has yet to make up.
“As the economy passed the worst of the third Covid wave, and vaccine optimism took hold, the labor market displayed a faint heartbeat,” Gregory Daco, chief US economist for Oxford Economics said in a note to clients. “While favorable seasonal factors helped lift the monthly jobs count, the January gain nonetheless represented little progress toward recovery.”
Some 22 million people were thrown out of work in March and April of last year, and nearly 10 million of those jobs have yet to be recovered.
The closing months of 2020 brought renewed challenges as surging COVID-19 infections ushered in business-sapping restrictions. People hunkered down at home, lowering consumer spending – the engine of US economic growth.
But many economists expect growth to accelerate later this year as vaccination drives pave the way for a return to business as usual.
Another round of growth-boosting, taxpayer-funded virus relief aid is also potentially in the cards.
While President Joe Biden is trying to strike a bipartisan deal over the next round of stimulus, Democrats in Congress are laying the groundwork to push through Biden’s $1.9 trillion plan without reaching a compromise with Republicans.
Biden’s plan would enhance and extend federal unemployment benefits, bolster the nation’s vaccine drive, and send $1,400 stimulus cheques to qualifying Americans.
Senate Republicans have proposed a much smaller $618bn stimulus package that includes $1,000 stimulus cheques that would only be sent to the lowest-income earners.
A deeper dive into the monthly jobs report reveals the stark inequalities that have become a hallmark of the nation’s economic recovery.
Low-income and minority workers have been the hardest hit by the pandemic and January delivered even more pain.
The leisure and hospitality sector, which employs a disproportionate number of women and minorities, lost 61,000 jobs last month. That’s on top of the more than half a million jobs the sector shed in December.
Professional and business services meanwhile added 97,000 jobs in January.
This imbalance is reflected in average hourly earnings, which ticked up by six cents to $29.96. That upward bump reflects the loss of lower-paying jobs.
The white unemployment rate in January fell to 5.7 percent. The African-American unemployment rate fell to 9.2 percent and the rate for Latinos fell to 8.6 percent.
The longer the recovery for the US jobs market, the deeper the scars it could leave on the nation’s workforce.
People who have lost their jobs are at risk of seeing their networks dry up and having their skills erode, making it even more difficult for them to find gainful employment again.
These deficits become less of a shackle as the labour market tightens. Right before the pandemic struck, unemployment was hovering near a 50-year low and many people who had previously given up looking for work had landed jobs.
Recapturing that pre-pandemic strength, though, appears to be a long way off.
This week, the non-partisan Congressional Budget Office said that the US jobs market would not recover to pre-pandemic levels until 2024. That estimate does not factor in a new round of virus relief aid.