A nationwide drop in Covid-19 cases and improvements in economic indicators have raised hopes that the US labor market is on the upswing, and government data due out Friday could show how strong that recovery is.
The Labor Department is set to release its January employment report, which will provide the latest unemployment rate and show how many jobs the economy added or lost last month.
The December report brought ill tidings, with the unemployment rate flat at 6.7 percent as the economy lost 140,000 positions after states imposed new business restrictions to cope with surging coronavirus infections.
In the weeks since, the United States has seen a nationwide decline in new cases, prompting states to ease those measures, and government and private surveys have picked up signs of improvement.
“Our forecast is a 200,000 increase in January payrolls. But the balance of
risks probably is to the upside; we’d be much less surprised by a 500,000
overshoot to the consensus than a 500,000 undershoot,” Ian Shepherdson of
Pantheon Macroeconomics said.
– Slowing recovery –
Business shutdowns starting in March to stop Covid-19 from spreading caused
mass layoffs and a surge in the unemployment rate to 14.7 percent, but it has
declined in the months since, albeit at an increasingly slow rate.
The December report was the first contraction in payrolls since the crisis
began, though the drop did not change the overall jobless rate.
The weeks to follow have brought signs hiring is improving.
The Labor Department reported new claims for jobless benefits declining for
the past three weeks straight, though the monthly employment report covers
the week containing the 12th of the month, and might not capture all of those
Payroll services firm ADP data this week showed the private sector adding
174,000 jobs in January, a result nearly triple analysts’ forecasts —
although that report can vary widely from the official figures.
“Given how fast the economy has rebounded from the spring collapse, a
slower, but still decent growth rate is likely,” economist Joel Naroff said,
predicting that the wide-ranging government data could show payrolls
increasing by up to 300,000.
But other economists are much less optimistic, and the consensus forecast
is for a gain of only 50,000 jobs.
– Skewed data? –
US President Joe Biden has pressed for $1.9 trillion in stimulus spending
to support the economic recovery, and the White House has said a one-month
jobs gain will not alter the need for the aid.
While that package may ultimately be whittled down by a cost-conscious
Congress controlled only narrowly by Biden’s Democrats, its provisions aimed
at keeping the unemployed and small businesses afloat could spur further
hiring later in 2021.
Wells Fargo Securities predicted job growth of just 60,000 last month as
the economy continues to struggle, a small gain compared to the size of an
employment deficit they put at around 9.8 million since February.
Elise Gould, senior economist at the Economic Policy Institute, was among
those who cautioned the Labor Department data may be skewed by its seasonal
adjustment formula, which expects employment to fall in January following the
hiring spike ahead of the year-end holiday shopping season.
“Given low actual seasonal hiring in the pandemic, seasonal adjustments
made the December numbers look worse than they really were and will make the
January numbers look better than they were,” she wrote.