Employment growth plummeted in December with 140,000 jobs lost, a dramatic reduction from the pace of employment growth experienced prior to COVID-19.
The pandemic’s strain on the recovery of jobs was much more obvious in the Bureau of Labor Statistic’s latest report on the labor market. In the 12 months leading up to the pandemic, an average of 194,000 jobs were gained per month at the national level. Not only did job growth fall well below that number, but it turned substantially negative. The 140,000 jobs lost in December 2020 was a clear indication that, until the virus is contained, there is a ceiling on the number of jobs that can be added back to the economy.
Optimism remains that a significant rebound will occur in 2021, but headlines the last few weeks cast doubt on how quickly the reacceleration will begin. COVID-19 counts have surged due to holiday gatherings, and the rollout of the vaccine has been at a fraction of the forecasted pace. And if that weren’t enough, a more contagious strain of the virus has entered the U.S. and already caused the tightest restrictions yet in the U.K.
The next several weeks and months heading into early spring will be key to understanding when a turning point can be expected. Will the virus continue to surge? Will vaccine rollouts become more streamlined? And what will the change in administration mean to policies to bridge the gap between now and the other side of the pandemic?
The unemployment rate held steady at 6.7% in December, but the rate varies dramatically depending on occupation. Computer and Mathematical (3.0%), Community and Social Service (2.6%), Legal (2.3%), and Healthcare Practitioners and Technical occupations (2.0%) remain in extreme demand. The role of talent acquisition professionals remains vital and challenging as the supply of labor in those fields is very tight, and candidates are more hesitant to switch jobs during uncertain times.
At the other end of the spectrum, service roles such as Food Preparation and Serving Related (17.1%) and Personal Care and Service (12.1%) continue to have elevated unemployment rates due to social distancing restrictions. Building and Grounds Cleaning and Maintenance occupations (10.5%) are, in part, impacted by fewer people traveling or going into the office.
Looking to the future, the U.S. still has 9.8 million jobs to recover from their levels before the pandemic, and LaborIQ® by ThinkWhy projects that jobs will not be fully recouped until early 2023. The biggest storylines to watch through early 2021 are:
- Timing, efficacy and number of people who will get a vaccine
- Impacts to industries and locations based on tightening social restrictions to contain the virus, especially if the new strain spreads rapidly
- Policies from the new administration to keep businesses and consumers afloat
Why It Matters
The nation is entering a period where we will likely have more turbulence. Some businesses, particularly those directly impacted by restrictions, will (at best) be in a holding pattern until more progress is made to reverse the virus’s trajectory. Other industries will simply need to continue finding strategic ways to maintain or gain traction during Q1 2021. Still, the expectation of a strong rebound on the other side of COVID-19 is the baseline. Until then, look for certain industries to remain much stronger than others.
With passage of the most recent stimulus legislation in Washington D.C., consumers got a boost in their ability to spend and an extension of protection from eviction. Notably, the bill extended benefits to part-time and gig economy workers who did not qualify for state unemployment insurance. Additionally, many small businesses should benefit from modifications that fund forgiveness of PPP loans as well as funds dedicated to some of the hardest-hit industries, such as those in arts and entertainment.
Despite the cloud of the pandemic, some businesses continue to thrive. Recruitment for the following types of businesses will likely remain more robust than for others through early 2021:
- Finance and insurance
- Home delivery services
- Grocery stores
- Computer equipment
- Housing construction
- Scientific research and development
Top Labor Markets Heading into 2021
LaborIQ® by ThinkWhy takes a broader look at the health of each location’s labor market. The proprietary ranking leverages 10 key variables to encompass the underpinnings of what makes a strong labor market for talent acquisition, including factors such as population growth, wage growth and educational attainment.
Out of 150 markets ranked, the following were the top five at the end of 2020:
- Dallas-Fort Worth-Arlington, TX
- Denver-Aurora-Lakewood, CO
- Boise City, ID
- Charlotte-Concord-Gastonia, NC-SC
- Tampa-St. Petersburg-Clearwater, FL
Click here to see the top 15 markets and a short video describing the themes we see with those that ranked at the top of the list.
Industry Movement & Recovery (Survey Reference Week December 6-12)
Industry notes and the year they are expected to return to pre-pandemic employment levels:
- Construction – Construction spending increased 0.9% to a record $1.46 trillion in November, according to data released Jan. 4 by the Census Bureau. The industry has been sustained by the surge in private homebuilding and other residential construction. Low mortgage rates have prompted strong housing demand, and supply is dropping amid the pandemic-induced migration away from densely populated areas to suburbs.
- Financial Activities – Overall, this industry continues to show resilience to the economic downturn, posting a near complete recovery overall with some sectors, such as Activities Related to Credit Intermediation and Insurance Carriers and Related Activities, at higher employment levels than before the pandemic. There are subsectors within Financial Activities related to leasing that have been impacted due to the current travel environment and remote work policies. For instance, Passenger Car Rental & Leasing, along with Rental & Leasing of Office Equipment, are among the hardest-hit industries in this sector. These will take time to recover, given waning travel trends and office traffic that is still far from pre-pandemic levels.
- Healthcare – The COVID-19 vaccination will require onboarding medical personnel to distribute it to the general population as the manufacturers ramp up production throughout the year, with millions of doses expected to be produced. In the meantime, post-holiday virus surges could continue to test healthcare staffing. As mentioned earlier, the unemployment rate for healthcare practitioners and technical occupations was just 2.0% in December.
- Professional and Business – This is projected to be the strongest-performing sector by the end of 2022, with professional and other high-tech jobs maintaining strong activity. IT services will continue to be in demand given the digitization of office interaction and businesses transitioning to ecommerce to avoid closure and meet consumer demand.
- Manufacturing – The ISM manufacturing index, a key economic indicator that measures order activity at U.S. factories, increased for the eighth consecutive month in December to 60.7%, up from 57.5% in November. Readings above 50 percent imply the manufacturing sector is expanding; readings below 50 indicate the sector is contracting. The ISM report indicated 16 of 18 manufacturing industries grew in December. Still, it will take some time to get back to former production levels due to both consumer demand and the labor challenges companies must overcome to attract and retain workers.
- Trade, Transportation and Utilities – Warehousing and Storage and Couriers and Messengers continue to see strong demand, but others within the industry are struggling. The recently approved stimulus package may prevent companies from further work force reduction as deteriorating demand is taking a toll on airlines. Airlines have tried to creatively address the problem by adding and eliminating routes based on demand, but this is simply rerouting crews – not bringing new crew members in. Employment in the Air Transportation industry has dropped by 23.4% since February 2020, a loss of 119,500 jobs.
- Government – Budget deficits will likely continue in coming years, given reduced income streams. The deficits require governments to reduce payrolls and services, which can balloon into other problems for local economies. New policy from the incoming administration will have an impact, but local tax revenue shortfalls pose a significant challenge.
- Mining and Logging – Oil prices have rebounded since dropping below zero for a brief period in the spring. Getting travel restarted as the pandemic abates will be a key for this industry. Baker Hughes, which provides weekly survey counts of rigs actively exploring or drilling for oil or national gas, reported that the number of rigs in the U.S. dropped from 796 at the end of 2019 to 351 at the end of 2020.
- Leisure and Hospitality – Even by optimistic measures, it is expected that tourism will not begin ramping up significantly until later in 2021, given the time it will take to distribute the vaccine. Until demand is sustained for hotels and restaurants, it will be difficult for them to accelerate hiring. Hotel occupancy rates dropped to 32.5% the week of December 20-26, according to an article from HotelNewsNow.com. Further, the most profitable customer for hotels, the business traveler, will likely not return in previous form due to changes in business’s operating behaviors resulting from the pandemic.
LaborIQ by ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to cities, industries, occupations and businesses across the U.S.