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December jobs report: payroll drops for first time since April

U.S. job growth turned negative for the first time since April in the final month of 2020, as the pandemic that rocked the economy over the past year dealt yet another blow to the labor market. Dana Peterson, Chief Economist at The Conference Board joins Yahoo Finance Live to break down Friday’s jobs report.

Video Transcript

JULIE HYMAN: But we do begin with the jobs report that we just got a little while ago, which definitely showed more weakness than had been anticipated, although there was a pretty broad dispersion of the jobs estimates. Dana Peterson from The Conference Board is joining us right now to talk more about it. Good morning, Dana. So--

DANA PETERSON: Good morning.

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JULIE HYMAN: --the headline number looks pretty negative here. And we've been talking about some of the underlying negatives as well. What's your takeaway? Are there any kind of silver linings here?

DANA PETERSON: I think this is a very mixed report. Indeed, the headline fell by 140,000. But when you look in the detail, nearly 500,000 jobs were lost in the leisure and hospitality sector, in particular amusement parks and restaurants. And that's really not surprising, given the fact that the edge of the winter, colder weather, you couldn't dine outside, you couldn't go to amusement parks, et cetera.

But when you look at the rest of the report, we actually saw some pretty strong gains in retail, warehousing and transportation, business services. So, I mean, there certainly were some silver linings in this report. And also, when you look at the unemployment rate, most economists thought it was going to rise. But it actually remained steady. And the participation rate, while still quite low, did not continue to fall.

And I would also note that average hourly earnings were up very strongly in the month. So that's certainly a positive for a consumer. So again, a very mixed report here.

BRIAN SOZZI: Dana, are you seeing anything in this report that would suggest if we do get, let's say, another round of stimulus and you get $2,000 stimulus checks to US households, anything in this report suggest we might get a consumer spending boom?

DANA PETERSON: Well, I'm not sure that we get a boom. Indeed, lots of consumers have been saving those stimulus checks. But still, it would help-- definitely help consumption and, ultimately, GDP growth for the first quarter, especially since with the $600 checks, many of those are already either in the mail or in-- or already in bank accounts. If we do have another $1,800 worth of money, certainly that's going to help consumption for the late first quarter, early second quarter.

But I think what's really important here is that governments are still keeping businesses on lockdown and consumers are not able to move around as freely as they would want to. And certainly, that's-- that's a function of the fact that we still have this raging virus, and that cases are still on the rise. And the vaccine rollout we just started a few weeks ago, but it's still quite slow. So our thoughts are that hopefully by the springtime, warmer weather will help job gains. And also, with the vaccine availability for most people, hopefully by the middle of this year, we should see a surge in spending on in-person services, and consequently, businesses will ramp up employment in order to meet that demand.

MYLES UDLAND: You know, Dana, obviously, we learn something new about the virus, the economy it seems like every day. But as you sit here wrapping up the jobs picture for 2020 and you think back to March and sort of your initial thoughts on how this might play out, how different did the year end up going? And, I guess, another way of asking is is the economy in a better spot, the labor market specifically, than perhaps you initially had feared when we saw these restrictions being rolled out and we didn't really know what was going to happen with the spread of the virus?

DANA PETERSON: Well, initially you saw something close to 22 million people lose their jobs over the March and April span. That was just really astounding. And it wasn't clear that many people would see their jobs come back. I mean, right now, about half of those jobs have been recouped. But still in all, you have roughly 10 million people who are not working.

And so it's still-- I would say that all in all, regardless of our expectations last year, last year was a very bad year in terms of the economy with respect to GDP growth and with respect to the labor market. But we do have upside risk coming into this year, again, with vaccine rollout and also treatments. And potentially all of this will-- and as well as the government supports. And we think that all these things wrapped together should help provide a much better outlook for 2021 relative to 2020.

JULIE HYMAN: Dana, The Conference Board, you guys put out a confidence index, a consumer confidence index that's closely watched. And the last one, the latest data was for November, which showed a decrease from the prior month, right, of 88.6, I believe. I'm curious about the feedback loop with things like jobs. In other words, when people see that there is this kind of a jobs number, does that hit confidence? And does it then feed back, perhaps, into job growth? How do you think about that cycle?

DANA PETERSON: Sure. I think if some-- if people, Main Street sees that job-- there were pretty big job losses, or I think most people watch the unemployment rate, that it's not falling as rapidly as they'd hoped, that does have a negative feedback loop in terms of how people think about current conditions. But what I would note that in that report, in the November report, expectations did tick up a little bit. And people were a little bit more optimistic about future business conditions, their own income, and certainly jobs prospects.

So hopefully, people will have-- in the December report, we will have reflection of the vaccine rollout and also belief that the Congress, at that point, was seriously thinking about deploying additional fiscal supports. And hopefully that will be reflected in expectations. But it wouldn't be surprising if current conditions still remained pretty morose, as people are still living and breathing this-- this-- this pandemic.

BRIAN SOZZI: Dana, it sounds as though you're looking for a pretty powerful recovery as more people get vaccinated. And I totally get it. But should we get that-- that-- what amount to a V-shaped recovery, how concerned are you that that widens the gap between the haves and have nots in this country?

DANA PETERSON: Sure. I mean, although the recovery right now is looking a lot like a W, kind of a lopsided W. I mean, we had a big V last year. And then things slowed. And then potentially we had very weak growth in the fourth quarter and also tepid growth in the first quarter of this year.

But I think that the K-shaped recovery is really a negative for the outlook. And we are seeing-- we saw last year and even into this year where you have very different recovery prospects for different types of people. Certainly people who were linked to the services sectors, they've experienced interruptions in income in labor. And those folks are definitely suffering much more intensively than people who did not experience a bout of unemployment or a reduction in income.

And certainly, people who own assets, either people who own houses, they've seen their home prices appreciate. People who own stocks and financial assets, they've seen those assets increase. And so certainly, I think there potentially could still be that K-shaped recovery going on, even though the overall economy is expected to improve.

JULIE HYMAN: Yeah, definitely. Dana Peterson, thank you so much for being here. Dana Peterson is chief economist at The Conference Board. Appreciate it.