Private payrolls unexpectedly drop by 123,000 in December: ADP
The U.S. private sector unexpectedly shed jobs in December as employment trends weakened sharply across the country before Congress passed its latest virus-relief package.
Private payrolls fell by 123,000 during the final month of 2020, according to ADP’s closely watched report, marking the first monthly decline since April. This followed a revised increase of 304,000 jobs in November. Consensus economists expected to see 75,000 jobs come back in December, according to Bloomberg data.
The service-providing sector was hit hard again after a brief reprieve in recent months, as tighter lockdown measures came back into effect across the country starting in mid-November. Leisure and hospitality industries lost 58,000 payrolls in December, followed closely by trade and transportation industries with a decline of 50,000. Manufacturing industries also lost 21,000 private payrolls in December, unwinding some of the goods-producing sector’s recent recovery. The industries that did see net payroll gains during December – including business services and education and health services – posted only modest increases.
“America's great jobs machine ran into a wall of rising coronavirus cases and state lockdowns which puts the entire economic recovery from recession at risk,” Chris Rupkey, chief financial economist for MUFG Union Bank, said in an email Wednesday morning. “The heart of every recession is job losses and right now the decline in jobs at year end is hinting that the dark days of the labor market last spring have returned. A new government is returning to Washington and legislators are going to have their hands full as economic weakness seems to have returned.”
The latest ADP payrolls report precedes the monthly Labor Department payrolls report by two days, but has been an unreliable predictor of the results in the government report over the course of the pandemic due to differences in survey methodology. With the ADP report, only individuals on an active payroll are counted as employed, while the Labor Department counts any individual that received a paycheck during the survey week for the report.
In October, for instance, ADP reported that the economy gained just 403,900 private payrolls, whereas the Labor Department reported an increase of 877,000. ADP’s undershoot was slightly less dramatic in November, however.
But one theme has been consistent throughout virtually all the recent jobs data: Hiring weakened notably in the final month of the year and layoffs picked back up. New weekly jobless claims jumped to a three-month high during December and stayed elevated at more than 800,000 per week for the majority of the month, as rising COVID-19 cases and colder weather dragged on employment.
As of Wednesday morning, the median economist was still looking for non-farm payrolls to rise modestly in December in the Labor Department’s jobs report, according to Bloomberg data. But outside of the consensus estimate, a number of individual economists anticipated the Labor Department would report its first payrolls decline in eight months, similar to the ADP print.
However, at the end of the month, Congress passed a $900 billion stimulus package, which included additional unemployment benefits as well as a replenishment of funds to the Paycheck Protection Program (PPP). Loans under the PPP are set to help businesses across the country keep their workforces employed, offering a lifeline to companies as they await a widespread reopening once vaccine distribution broadens out.
“COVID-19 likely will be a meaningful drag on the economy around the turn of the year,” JPMorgan economist Bruce Kasman said in a recent note. “But we now see more momentum than we had anticipated heading into this weakening [with] support from fiscal policy coming more quickly than we had previously believed.”
“Vaccines continue to be rolled out in the U.S., and we think that the combination of fiscal support and better control of COVID-19 will generate strong growth in the middle of 2021,” he added.
—
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Read more from Emily:
Some wellness products growing ‘over 1,000%’ during pandemic: Ro CEO
What we can learn from the 17 stock market crashes since 1870
Find live stock market quotes and the latest business and finance news
For tutorials and information on investing and trading stocks, check out Cashay
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.