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Non-farm Payrolls Decline

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Pre-market activity is trading double-digits into the green only minutes following a disappointing non-farm payrolls report for December from the U.S. Bureau of Labor Statistics (BLS). Expectations of +50K jobs last month came in, instead, at -140K, with an Unemployment Rate steady at 6.7%, which was more or less expected. It was the first negative BLS jobs number since April’s abysmal -20.79 million, when pandemic conditions cratered the U.S. labor market.

The private sector dropped 95K jobs in December in aggregate, not exactly matching but on the same trajectory as ADP’s ((ADP - Free Report) -123K reported on Wednesday. How we can still see the Unemployment Rate steady has to do with a Labor Force Participation Rate at 61.5%, unchanged month over month but down from this past summer. Average Hourly Earnings rose higher than expected to +0.8%, but we may attribute this more to a loss of low-paying jobs in the labor market than actual salary hikes.

After months of outsized gains in Leisure/Hospitality, which routinely would put up higher monthly job gains than normal job-leading industries like Healthcare (+39K in December), the floor has finally given out: 498K jobs were lost among hotels, amusements, gambling, restaurants, etc. in the past month. This is an extraordinarily high total for monthly jobs losses. This was somewhat offset by Professional/Business Services at +161K and Retail at a surprisingly high +121.

Clearly, a miscalculation of a return to normal social gatherings has caused this massive depletion — obviously due to the continuing pandemic — and led to a major roll-back of reopening plans. Housekeeping, dishwashers, tour guides, et. al. are all positions many in the Leisure/Hospitality space thought would have returned by this point, double-digit months since Covid-19 first reached our shores. Thus, we may surmise that until we have proper immunization practices in place for a majority of Americans, our labor market — and thus our overall economy — may continue to flap in the wind.

It’s not all bad news in today’s BLS report: November’s job gains were revised up from 245K originally reported to 336K today; October went from 610K to 654K new hires — the total of which nearly makes up the entire deficit we see in December’s report. But this is all rearview mirror stuff. The question is: Where do we go from here?

For the second-straight day, new Covid-19 infections have hit the second-highest single-day total since the pandemic began: 266,197 new cases were reported Thursday. This looks to be troubling as a trend; the seven-day average is climbing near a quarter of a million new cases per day, with expectations that contagion over the holidays may push this well higher in the weeks to come. Fatalities have already reached an all-time high yesterday at 4033. It’s nothing short of tragic.

Perhaps flipping the calendar from 2020 to 2021 was not the remedy some of us were hoping it would be. But what the markets are focusing on — and we should be, too — is that the recovery is coming. The question is: When?


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