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The only critical number is the doses of vaccine administered

Summary:
January 2021 jobs report: a strong divergence between very weak job gains, but a big drop in unemployment; but the only critical number is the doses of vaccine administered  For the past several weeks, based on the increase in initial jobless claims, I have warned that the December employment report might have a negative number, or at very least a very weak positive. Once again this was an accurate forecast. There was a strong divergence between the household and establishment reports this month. And to cut to the chase, the only real critical number is the number of vaccinations administered. HEADLINES: 49,000 million jobs added, only 5,000 of which were in the private sector and 43,000 in government. The alternate, and more volatile

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January 2021 jobs report: a strong divergence between very weak job gains, but a big drop in unemployment; but the only critical number is the doses of vaccine administered

 For the past several weeks, based on the increase in initial jobless claims, I have warned that the December employment report might have a negative number, or at very least a very weak positive. Once again this was an accurate forecast.


There was a strong divergence between the household and establishment reports this month. And to cut to the chase, the only real critical number is the number of vaccinations administered.

HEADLINES:

  • 49,000 million jobs added, only 5,000 of which were in the private sector and 43,000 in government. The alternate, and more volatile measure in the household report indicated a gain of 201,000 jobs, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate declined 0.4% at 6.3%, compared with the January 2020 low of 3.5%.
  • U6 underemployment rate fell -0.6% to 11.1%, compared with the January 2020 low of 6.9%.
  • Those on temporary layoff decreased 293,000 to 2,746,000.
  • Permanent job losers increased by 133,000 to 3,503,000.
  • November was revised downward by 72,000. December was also revised downward by 87,000 respectively, for a net loss of 159,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

I am still highlighting these because of their leading nature for the economy overall.  These were mixed: 

  • the average manufacturing workweek increased to 40.4 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs declined by 10,000. Manufacturing has still lost -592,000  jobs in the past 11 months, or 5% of the total. About 60% of the total loss of 10.6% has been regained.
  • Construction jobs decreased by 3,000. Even so, in the past 11 months -256,000 construction jobs have been lost, 3% of the total. About 80% of the worst loss of 15.2% loss has been regained.
  • Residential construction jobs, which are even more leading, *rose* by 3,600. Since February there have now been actual job *gains,* and employment in this sector is at another new 10 year+ high.
  • temporary jobs increased by 80,900. Since February, there have still been 241,100 jobs lost, or 8% of all temporary help jobs.
  • the number of people unemployed for 5 weeks or less declined by -626,000 to 2.278  million, compared with April’s total of 14.283 million.
  • Professional and business employment rose by 97,000, which is still 825,000, or about 4% below its February peak.

Wages of non-managerial workers

  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.03 from $25.15 to $25.18, which is a 5.4% YoY gain. This is a level not seen in the past 10 years outside of the first months of this pandemic. Relative gains in this measure reflect that job losses during the pandemic have occurred primarily among lower wage earners.

Aggregate hours and wages:

  • the index of aggregate hours worked for non-managerial workers rose by 0.5%. In the past 11 months combined this has nevertheless fallen by about  5.5%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.6%. In the past 11 months combined this has nevertheless fallen by about 2.5%. Still, over 90% of the loss from February to April has been made back up.

Other significant data:

  • Full time jobs gained 301,000 in the household report.
  • Part time jobs declined 456,000 in the household report.
  • The number of job holders who were part time for economic reasons decreased by 216,000 to 4.567 million. This is still an increase since February of 1,556,000.
  • UPDATE: The pandemic has had a singular effect on food and drink establishments. Since October, there have been 446,400 jobs lost. “Only” 19,400 of those were in January – so that is at least “less awful.” 

SUMMARY
Once again the household and establishment reports strongly diverged. The household report, from which unemployment rates and the number of full-time vs. part-time workers are taken, showed strong gains, driven by both increased employment and a slight decrease in the number of people in the jobs market. The establishment report, by contrast, showed weak gains or outright losses, depending on the employment sector. What stands out is the huge gains in temporary employment, which is a leading sector, but also strongly suggests that employers are not willing to make permanent commitments in this volatile environment.


But for the vaccines, the December and January reports together would strongly suggest that a “double-dip” recession has started, due to the tremendous surge in new COVID cases during the past 3 months. I suspect, however, that competent policy from the Biden Administration and the continuing improvement in the number of vaccines administered daily, plus the onset of warmer weather in spring, will end these weak numbers in a month or two.

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