Thursday, January 07, 2021

December Employment Preview

by Calculated Risk on 1/07/2021 01:05:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for December. The consensus is for 70 thousand jobs added, and for the unemployment rate to increase to 6.8%.

ADP Report: The ADP employment report showed a loss of 123,000 private sector jobs, well below the consensus estimate of 88 thousand jobs added.  The ADP report hasn't been very useful in predicting the BLS report, but this suggests the BLS report could be weaker than expected.

ISM Surveys: The ISM manufacturing employment index increased in December to 51.5%, up from 48.4% in November.   This would suggest essentially approximately 10,000 manufacturing jobs lost in December. ADP showed 21,000 manufacturing jobs lost.

The ISM Services employment index decreased in December to 48.2% from 51.5% in November. This would suggest around 25,000 service jobs added in December. Combined, the ISM surveys suggest around 15,000 private sector jobs added in December. The ISM surveys haven't been as useful as usual during the pandemic, but this does suggest the report could be weaker than expected.

Unemployment Claims: The weekly claims report showed a high number of total continuing unemployment claims during the reference week, although this might not be very useful right now. If we did a "Rip Van Winkle", and saw the weekly claims report this morning, we'd think the economy was in a deep recession!

Seasonal Retail HiringSeasonal Retail Hiring: Typically retail companies start hiring for the holiday season in October, and really increase hiring in November.   But only a few temporary workers are hired in December.  Here is a graph that shows the historical net retail jobs added for October, November and December by year.

Click on graph for larger image.

In 2019, retailers hired 79,500 seasonal employees (NSA) in December. That translated to a gain of 41,000 SA. Brick and Mortar retailers will be more cautious this year, and retail might decline a little SA in December. 


Year-over-year change employmentPermanent Job Losers: Something to watch in the employment report will be "Permanent job losers". While there has been a strong bounce back in total employment, from the shutdown in March and April, permanent job losers have been increasing.

This graph shows permanent job losers as a percent of the pre-recession peak in employment through the November report.

This data is only available back to 1994, so there is only data for three recessions. In November, the number of permanent job losers increased to 3.743 million from 3.684 million in October.

Conclusion: Most of the indicators suggest a weak report in December. My guess is the report will be lower than the consensus, and could show jobs lost in December.