Hopes sank for a V shaped recovery when the U.S. Labor Dept. released its December Jobs report for 2020 with a drastic drop in non farm job creation of only 140,000, and a still weak labor force participation rate of 61.5 percent that combined with the November report showed that the COVID pandemic has wreaked, and will continue to wreak havoc on the American economy, as it has in most of the developed world, and beyond.
The $900 billion relief package that Congress passed in December arrived too late to have a significant impact on an already burdensome economy, but it is expected that the incoming Biden administration will continue more stimulus payments, both to individuals and also to state and local economies, both who face dire consequences without help.
Election week markets, recalled Jill Schlesinger, CBS News business analyst, in an earlier column, noted the market's reaction, with an S&P soaring 7.3 percent, “the best presidential election week since 1932.”
Now with a Democratic majority in the Senate, after the Georgia runoff elections, corporate America may not be as sanguine as they were with a Republican controlled Senate, and many are hazarding a guess as to any tax increases.
As we recalled earlier King Covid reigns, and with recent surges in the pandemic and business restructuring and local and state governments adding more restrictions Wall Street as well as Main Street will continue to suffer.
Federal Reserve Chair, Jerome Powell noted just after the election, “the path of the economy will depend significantly on the course of the virus,” and continued relief set against the promise of the two major vaccines can offer hope to millions of workers.
Those especially hard hit are those in the service sector, and especially those that depend on in person interaction such as leisure and travel with $500,00 cuts in December, and restaurants which are acutely vulnerable, faced 372,000 in job losses, and hotels with 24,000.
Adding to the losses were private schools and colleges with 60,000 job losses creating economic havoc in smaller towns where they are often the main employer.
There were some gains, perhaps not strong enough to sustain, but manufacturing rose by 38,000 jobs, construction by 51,000 and retail in a surprising spin 120,000 jobs added by a loosening of restrictions and warmer weather that extended into Fall.
That hoped for V recovery has now clearly become a K shaped with the upper branch focused on the managerial and professional class, mostly white, and the bottom branch with lower waged service workers, mostly Black and Brown people, whose future seems bleak, especially those who are restaurant workers, and whose brief surge during the summer, has hit a low with the advent of cold weather and a dearth of outdoor dining.
If this continues, many households will not only face an uncertain future, but also can contribute to a slack in the nation’s GDP. And, as Diane Swonk, chief economist at Grant Thornton said to The New York Times, “Most notably, this is still very much a low wage recession, and the losses where we first saw them when the pandemic hit.”
It is worth noting that Labor does not count those who are not looking for work (who may feel there are not jobs available), or are caring for children, or elderly relatives, including those with disabilities.
Contributing to long term joblessness are those the Times noted who have criminal background records, and the disabled, “that make it hard to find jobs even in the best of times.”
Biden said, according to The Wall Street Journal, ““The bottom line is the jobs report shows we need to provide more immediate relief for working families and businesses—now,”. . .. “He also said he would seek to increase the federal minimum wage to at least $15 an hour, calling on Congress to pass the measure.”
Equally problematic as we noted last month are women who are now forced to care for children, and other dependents, have left the workforce, especially those who worked in service areas; aided and with partners or spouses who are higher wage earners.
The subsequent void has cut back prime age working women to 75 percent of the workforce in December from 77.1 in February of 2020, before the pandemic.
The racial breakdown has shown that Blacks have made a moderate stability of 9.9 percent employment rate against the general rate of 6.7, against 10.3 percent before; but, Hispanics have increased to 9.3 percent, from 8.4 in November, as active participants in lower wage and service sectors.
What concerns most economists, labor leaders and lawmakers is that the country has lost half a million jobs in 2020, the most significant decline “on a percentage basis since the aftermath of World War II.”
Of equal concern are state and local governments who as we have seen did not gain monies from the most recent aid bill, but have faced budget cuts and layoffs, since they are mandated to have a balanced budget, and who employ 13 percent of employers in the United States.
There have been 1.4 million of those jobs lost since last February, the pre pandemic marker that is the baseline for comparison, with 51,000 alone last month.
Some believe like Swonk that this is a low wage recession, driven by the pandemic and that shoring up the service sector with financial relief, and the vaccine, there might be a recovery, and Bloomberg reported that “Michael Gapen, chief U.S. economist at Barclays Plc. “It does show that if we can get control of the pandemic, then we can restore economic activity and labor market conditions over the course of this year. It’s a pandemic-driven number, a pandemic-driven composition.”
Wage growth, as can be imagined, has declined, and they added,“For the full year, payrolls declined by 9.37 million, the most in records back to 1939 and exceeding the combined slump in 2008 and 2009 during the Great Recession and its aftermath.”
What lies aheads depends on so many factors, as we have seen, and while remaining hopeful, this optimism is tempered by caution, and especially with the vaccine rollout, and the policies of the incoming Biden administration, aided by its experienced cabinet, and its now Democratic majority in Congress.
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