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Economy in Brief

U.S. Payrolls Fall Unexpectedly in December
by Tom Moeller  January 8, 2021

• Coronavirus restrictions, business shutdowns & severe weather cause decline.

• Earnings growth accelerates.

• Jobless rate holds steady at lowest level since March.

The recovery in the labor market came to an abrupt end in December. Nonfarm payroll employment declined 140,000 during December following a 336,000 November gain, revised from 245,000. It was the first decline since April. A 66,000 employment increase had been expected in the Action Economics Forecast Survey. The estimates amongst 22 forecasters had ranged from 345,000 to -150,000. October's 654,000 increase in payrolls was revised from 610,000. From December-to-December, nonfarm payrolls declined 6.0% compared to a 1.4% twelve-month rise in 2019.

Average hourly earnings surged 0.8% (5.1% y/y) last month following an unrevised 0.3% November rise and two months of 0.1% gain before that. It was the largest increase since April. A 0.4% rise in earnings had been expected.

The unemployment rate held steady at an expected 6.7% during December. Employment in the household survey rose 21,000 (-5.6% y/y) after increasing 140,000 in November while the labor force rose 31,000 (-2.4% y/y) after falling 182,000 in November. The overall jobless rate, including those who were marginally attached or working part-time for economic reasons, slipped to 11.7% from 12.0%, its lowest point since March.

From the payroll survey, the 140,000 decline in jobs was led by a 188,000 shortfall in private service sector employment. Leisure & hospitality jobs were off 498,000 (-22.7% y/y) after improving 75,000 in November. Education & health services employment fell 31,000 (-4.7% y/y) following a 44,000 gain, while jobs in the information sector eased 1,000 (-8.8% y/y) after a 2,000 gain. To the upside, jobs in trade, transportation & utilities rose 191,000 (-2.4% y/y) including a 120,500 rise (-2.7% y/y) in retail trade which followed a 21,200 decline. Professional business services employment gained 161,000 (-3.7% y/y) after an 88,000 increase while temporary help jobs rose 67,600 (-7.1% y/y) after a 41,800 rise. Employment in finance rose 12,000 (-0.7% y/y) after improving 16,000 in November.

Factory sector employment rose 38,000 last month following a 35,000 November gain. Construction payrolls rose 51,000 following a 29,000 increase. Mining & logging sector employment improved 4,000 (-11.8% y/y) after rising 3,000.

Government sector employment declined 45,000, the fourth consecutive monthly drop. Local government employment declined 32,000 (-6.5% y/y), the third decline in four months. State government jobs were off 19,000 (-6.7% y/y) and have been declining since February. Rising a slight 6,000 (2.2% y/y) was federal government employment following three months of decline due to an exit of Census workers.

The 0.8% strengthening in average hourly earnings reflected a 1.1% rise (4.3% y/y) in education & health services and a 0.8% gain (6.3% y/y) in retail trade. Elsewhere in the service sector, professional & business service sector earnings rose 0.7% (4.0% y/y) and leisure & hospitality earnings edged 0.1% higher (1.6% y/y). Factory sector earnings eased 0.1% (+2.8% y/y) while construction sector pay rose 0.2% (2.8% y/y).

Hours-worked in the private sector eased to 34.7 following three months at 34.8. Mining & logging sector hours slipped to 44.6, down from last year's average of 46.2. Construction sector hours rose m/m to 39.1, the highest in nine months. Factory sector hours held steady at 40.2 but remained up from 38.0 in April. Overtime factory hours improved to 3.3, up from April's 2.1 low.

Private service sector hours eased to 33.7, down from the 33.8 record high in November. (The series dates back to 2006.) Financial sector hours held at 37.7. Information sector hours held at an elevated 36.9, while professional & business service hours were steady at a record 36.7. Education & health hours rose to a new high of 33.7 but leisure & hospitality fell sharply to 25.2 hours from 25.7.

From the household survey, the steady unemployment rate of 6.7% during December occurred as the labor force participation rate held at 61.5%. It remained down from 63.4% in January. The teenage participation rate eased to 35.7%. For those aged 20-24, it improved to 70.8%, higher than April's low of 64.5%. For workers aged 25-54, the rate edged up to 81.0%, off from the January high of 83.0%. For men aged 25-54, the rate fell to 87.3%, down from the high of 89.5% in March of 2019. For women of that age, the rate rose to 74.8% but remained well below the record high of 76.9% in both December and January. For workers aged 55 & over, the participation rate fell to 38.6%, down from 40.3 in February.

The employment/population ratio for all workers held steady at 57.4% in December, up from April's low of 51.3%, though sharply below February's high of 61.1%. The average duration of unemployment rose to 23.4 weeks, up from 6.1 weeks in April.

The teenage unemployment rate rose to 16.0% from 13.9% in November but remained below the record 32.1% in April. The rate for workers aged 20-24 increased to 11.2%, up from 6.3% in February. For workers aged 25-54, the rate declined m/m to 5.8%, down from the 12.8% April high. For those over 55, the jobless rate rose to 6.0% but stood below the record 13.6% in April.

By educational attainment, the rate of unemployment of workers without a high school diploma rose to 9.8% from 9.2%, still well below the 21.0% rate in April. High school graduates without any college were 7.8% unemployed last month, down from April's high of 17.3% but higher than the 3.5% rate in February. Those with some college but no degree were a steady 6.3% unemployed, down sharply from the 15.0% April peak but still up from January's record low of 2.7%. College graduates experienced 3.8% unemployment in December, still significantly higher than its 1.9% low in February.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Dec Nov Oct Dec Y/Y 2020 2019 2018
Payroll Employment -140 336 654 -6.0% -5.8% 1.4% 1.6%
 Previous Estimate -- 245 610 -- -- -- --
  Manufacturing 38 35 43 -4.2 -4.6 1.2 2.0
  Construction 51 29 72 -1.7 -2.9 2.8 4.6
  Private Service-Producing -188 350 808 -6.6 -6.6 1.4 1.5
  Government -45 -81 -271 -5.5 -3.3 0.6 0.5
Average Weekly Hours - Private Sector 34.7 34.8 34.8 34.3 34.6 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.8 0.3 0.1 5.1 4.7 3.3 3.0
Unemployment Rate (%) 6.7 6.7 6.9 3.6 8.1 3.7 3.9
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