The December Numbers Were Awful, but the Economy Has a Clear Path to Health
It seemed appropriate that the jobs numbers for the final months of 2020 would be as nasty as the year as a whole was.It is fair to say that the loss of 140,000 jobs in December indicates a backsliding of the economic recovery that took place in the summer and fall. Other numbers in Friday’s report confirm that basically gloomy picture, such as the continued depressed share of adults who are in the labor force. In the debate over which letter of the alphabet best describes the pattern of the 2020 economy, the December numbers pretty much rule out “V.”But. But.The details of this report, combined with everything else swirling around in economic policy and the financial markets, make for a more optimistic case. There is an opportunity for 2021 to be the year of a remarkable bounce-back, thanks to monetary and fiscal stimulus; the delayed effects of buoyant markets over the last few months; and above all the prospect of widespread coronavirus vaccination.The December numbers point to a jobs crisis that is contained to sectors dealing with the direct effects of pandemic-related shutdowns. Unlike the data from the spring of 2020, the latest numbers are not consistent with the sort of broad-based absence of demand in the economy that caused the recovery from the last few recessions to be so long and so slow.The steepest December job losses were in leisure and hospitality, a sector that shed 498,000 positions. Consider what that number represents: countless restaurants, hotels, and performance stages and arenas shuttered; and hundreds of thousands of people back on the jobless rolls and unsure when they’ll be able to resume work.The good news is we know how and when those jobs can come back. If enough Americans are vaccinated, they will probably feel comfortable in returning to normal patterns of leisure activity. An outright boom in those sectors is plausible later this year. Americans’ savings are through the roof, and it is easy to imagine pent-up demand for travel, concerts and the like.Other sectors less directly affected by public health concerns — industries that were at recessionary levels just a few months ago — kept improving. They are not necessarily back to pre-pandemic levels, but on track to get there before much longer.Construction employment, for example, is still 3 percent below its pre-pandemic levels, but the sector added 51,000 jobs in December. At that pace, it will be back to full health in the spring. The story is similar for manufacturing jobs, still down 4 percent from February but having added 38,000 positions in December.The list of sectors fitting that basic pattern — still at levels consistent with a recession but clawing their way back steadily — is long, and it includes industries as varied as truck transportation, real estate rental and leasing, and professional and business services.Updated Jan. 8, 2021, 8:36 p.m. ETBoth the policy and market environment should create tailwinds for those sectors in 2021, helping them return to full health faster.A booming stock market doesn’t translate into more economic activity overnight. But as corporate executives make their capital spending plans and as consumers make their spending decisions, surging stocks do tend to have a positive effect. That would imply that the positive effects of new market highs over recent weeks should start to show up as public health concerns recede.The December employment numbers cover a period before Congress reached a compromise pandemic aid package worth $900 billion. Among other things, the bill includes enhanced unemployment benefits that will help the hundreds of thousands of workers whose jobs disappeared in December, as well as $600 checks that should strengthen consumer spending in the months ahead.Moreover, the Democratic victories in Georgia this week and the resulting Senate majority make it more likely that those checks will grow to $2,000 per person. It also means that the Biden administration will have the flexibility to undertake a more ambitious agenda, including infrastructure spending, that should support overall economic activity.A Democratic Congress will also be likely to provide more aid to states, helping one of the other areas of job loss in December besides leisure and hospitality (state and local governments cut 51,000 jobs last month).Plenty could still go wrong, like a prolonged bungling of the vaccine rollout or a market correction that damages business and consumer confidence. And none of this diminishes the pain of the millions of Americans who are still out of work.But put it all together, and more so than at any point since the start of the pandemic, the economy has a clear path back to full health.