Insights and Perspectives

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for January 2021 on Friday, February 5^th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 11 months since the Covid-19 economic lockdown and signal the labor market recover is continuing to move sideways after strong growth from May through October 2020. Strong growth should reassert itself as more Covid-19 vaccinations are administered later in 2021.

Employment in the U.S. rose a modest 49,000 jobs, almost exactly in line with the 50,000 jobs expected in the Geographic Solutions, Inc. (GSI) forecast. The forecast tied the WSJ Economist Survey which also predicted an increase of 50,000. The GSI forecast was derived from internal data on job severance counts and the number of applications for unemployment benefits filed on GSI state client sites. The forecast used unemployment claims data from the Department of Labor as an external indicator in the forecast.

The unemployment rate fell to 6.3%, just under the GSI and WSJ forecast of 6.7%. The unemployment rate forecast used the same indicators as the employment forecast.

Goods-producing industries have typically outperformed the service-providing industries during the lockdown, even growing in December as overall jobs declined. January marks the first month since April that goods-producing jobs fell by 4,000. However, the service-providing jobs more than compensated, expanding by 53,000 during the month.

Job market gains came from a strong performance in the Professional & Business Services sector in January that totaled 97,000 new jobs. Public-sector jobs also provided a significant source of growth, increasing 43,000. After the Trade, Transportation, & Utilities industry was the leading job producer in December, it lost more jobs than almost any other industry (-50,000). This may be partially explained by how the pandemic has thrown off seasonal factors as consumers accelerated their preference for online retail during the holiday season.

Leisure & Hospitality continues to languish as we await the vaccine and consumers pull back due to the cold weather over the last couple of months. Its employment remains 22.9% below February, more than twice the remaining percentage of any other major sector.

The unemployment and labor force numbers come from the Current Population Survey which just updated its population estimates in January. Therefore, we should take comparisons to the previous months a little more lightly than usual. The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate declined to 6.3% from the previous month.

The labor force participation rate basically held steady at 61.4% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment ticked down last month by 0.6% to 11.1%. The larger decline in the U-6 unemployment rate shows that a higher share of the unemployed have come off the sidelines and are once again looking for work.

While another federal stimulus would help some cash-strapped consumers boost the economy, the real bounce-back depends on the distribution of the Covid-19 vaccines. When the vaccination rate is high enough, consumers will feel sufficiently comfortable to return to their pre-pandemic spending habits. The vaccination rates among the states will be a key factor we track to look at the trajectory of employment and other labor market data.