US economy misses forecasts, adds 49,000 payrolls in January as daily virus cases peak
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- The US added 49,000 jobs in January, missing the estimate of 105,000 additions.
- It was a reversal from the 227,000 payrolls lost in December, the first decline in seven months.
- The unemployment rate dropped to 6.3% from 6.7%, beating forecasts.
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The US labor market improved slightly last month as daily COVID-19 cases crested and new stimulus hit households, but job-addition figures still fell short of expectations.
American businesses added 49,000 nonfarm payrolls in January, the Bureau of Labor Statistics said Friday. The report misses the consensus economist estimate of 105,000 job additions, according to Bloomberg data.
The gains also mark a reversal from December's revised decline of 227,000 payrolls. That report had snapped a seven-month streak of gains and signaled a dire hit to the country's economic recovery.
The US unemployment rate dropped to 6.3% from 6.7%, the agency said. Economists expected the rate to hold steady from December's reading. The pace of improvement has slowed drastically in recent months after plunging from its 14.7% high at the start of the coronavirus crisis.
"This morning's employment report will support the political argument that more stimulus is needed," David Donabedian, the chief investment officer of CIBC Private Wealth, said in a statement. "The large drop in the unemployment rate was partly due to a decline in labor force participation (not necessarily a sign of strength)."
Looking closer
The government's monthly report of labor-market conditions gives the most insight into how the country is working through the pandemic and its fallout. It also details how the virus has pushed Americans out of their jobs. About 4.7 million people said COVID-19 was their main reason for not seeking employment, according to the report. The sum is up from 4.6 million Americans in December.
About 14.8 million Americans said the pandemic was the primary reason why their employer halted operations. That's down from 15.8 million people the month prior.
The number of Americans temporarily laid off dipped to 2.7 million from 3 million. That sum is down significantly from the high of 18 million in April. Still, temporary layoffs, like other gauges of unemployment, sit well above pre-pandemic levels as businesses struggle to rehire.
Average hourly earnings for nonfarm workers gained by 6 cents to $29.96. Wages have steadily trended higher after falling through last spring, though remain below their April record of $30.03.
The proportion of Americans telecommuting because of the pandemic slid 0.5 points to 23.2% in January.
Two tailwinds
After months of soaring COVID-19 cases and harsh economic lockdowns, signs are pointing to a healthier backdrop to come. Vaccine distribution has overcome early hurdles and the US is now administering 1.34 million shots a day on average, according to Bloomberg. State data shows about 35 million doses have been issued.
Daily COVID-19 infections continue to fall as well, reversing much of the winter surge in new cases. The US reported 123,907 new virus cases on Thursday, according to The COVID Tracking Project. That's down from a high of nearly 300,000 new cases in early January. Hospitalizations hit 88,668, down roughly 30% from their mid-January peak.
Elsewhere in economic data, filings for unemployment benefits continue to fall and signal a healthy rate of improvement in the labor market. Weekly jobless claims dropped to 779,000 for the week that ended Saturday, handily beating the consensus economist estimate of 830,000 claims. The reading marks three straight weeks of falling claims counts.
Continuing claims, which track Americans receiving unemployment benefits, fell to 4.6. million, similarly beating the economist forecast of 4.7 million claims.
January was also the first month to see significant benefit from the $900 billion stimulus package signed by President Donald Trump at the end of 2020. The bill included $600 direct payments, expanded unemployment benefits, and relief for schools.
Credit- and debit-card data tracked by Bank of America suggested stimulus recipients increased spending last month as aid was delivered to households. A sustained uptick in consumer spending stands to revitalize the economic recovery and possibly help firms rehire.
It's increasingly likely that even more help is on the way. The Senate on Friday approved a budget measure that opens the door for President Joe Biden's $1.9 trillion stimulus plan to be approved. The measure allows Democrats to pursue the legislation without support from Senate Republicans. Still, Biden has indicated he aims to pursue bipartisan support for the relief package.
The stimulus proposal includes $1,400 direct payments, state and local government aid, and another expansion to unemployment benefits. Republicans countered with a $600 billion package in January but the deal stands little chance of garnering ample support.
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