2020 Ends with Job Losses

By Richard Branch, Chief Economist Dodge Data & Analytics

NEW JERSEY — JANUARY 11, 2021 —  U.S. economy lost 140,000 jobs in December as the economy downshifted in the face of rising COVID-19 cases across the country. The construction sector was one of the few bright spots during the month as it gained 51,000 jobs. Still, construction has added back less than 80% of the jobs lost in March and April.

 

 

Other data from the construction sector suggests construction has not escaped the distress from COVID-19. The Dodge Momentum Index, a leading indicator on nonresidential building activity, finished 2020 4.8% below where it was at the end of 2019 – a gap that would have been much wider if not for robust activity in the warehouse market. Outside of building related to e-commerce, planning for both commercial and institutional building has struggled to gain traction in the midst of weak economic growth.

Construction starts (ground breakings) also suffered greatly during the year. Building starts posted significant declines in 2020 with only single family housing and warehouse activity showing strength. Nonbuilding (infrastructure) starts also languished as state and local revenues declined.

The December jobs report is a poignant reminder that the U.S. economy was in precarious shape as 2020 ended due to the new wave of COVID-19 cases spreading rapidly across the country. For the first time in nearly a year, however, we can say that the immediate future looks brighter. The $900 billion stimulus plan approved by Congress at the end of 2020 will provide meaningful support for individuals and businesses. Further deployment of vaccines will also lead to a more rapid recovery as the year progresses. While it will be a long road back to full recovery, the construction sector is poised for a return to growth in 2021.

 

 

Job Growth Slows in November

Richard Branch, Chief Economist, Dodge Data & Analytics

NEW JERSEY – DECEMBER 4, 2020 – According to the Bureau of Labor Statistics, the U.S. economy added 245,000 jobs in November – a considerable step back from the revised 610,000 jobs added in October. Still, the unemployment rate dipped to 6.7%. Private sector employment improved by 344,000, while the public sector shed 99,000 positions. Within the public sector, state and local governments cut 13,000 positions, while federal employment was down 86,000 reflecting the loss of temporary workers that had been hired for the 2020 Census.

 

Within the private sector, transportation and warehousing added 145,000 jobs, while retail jobs fell 34,700 reflecting less seasonal hiring in brick and mortar retail and increased online shopping. Manufacturing jobs improved by 27,000, while professional and business services employment improved by 60,000.

Employment growth in the construction sector also lost steam in November, adding 27,000 positions, down from the 72,000 added in the previous month. Gains were seen in residential and nonresidential building, heavy and civil engineering as well as in residential specialty trade contractors. Nonresidential specialty trade contractors cut 1,200 positions. The construction sector has now added back nearly 80% of the jobs lost during March and April, while total nonfarm employment has added back just under 60% of the jobs lost.

Economic growth has slowed noticeably over the past several months and the labor market is beginning to stagnate as a result. There should nevertheless be some solace that employment growth was as strong as it was in November, given the considerable headwinds facing the economy. The next wave of the virus is accelerating and the prospects for additional federal stimulus are still very uncertain, so employment growth is expected to slow further in the months to come. Construction employment should remain somewhat resilient, however, due to the booming housing market. Looking into 2021, the hope for rapid deployment of a vaccine sets the table for a stronger economic recovery taking hold by the midpoint of the year.

 

 

Job Growth Slows in November

Richard Branch, Chief Economist, Dodge Data & Analytics

NEW JERSEY – DECEMBER 4, 2020 – According to the Bureau of Labor Statistics, the U.S. economy added 245,000 jobs in November – a considerable step back from the revised 610,000 jobs added in October. Still, the unemployment rate dipped to 6.7%. Private sector employment improved by 344,000, while the public sector shed 99,000 positions. Within the public sector, state and local governments cut 13,000 positions, while federal employment was down 86,000 reflecting the loss of temporary workers that had been hired for the 2020 Census.

 

 

Within the private sector, transportation and warehousing added 145,000 jobs, while retail jobs fell 34,700 reflecting less seasonal hiring in brick and mortar retail and increased online shopping. Manufacturing jobs improved by 27,000, while professional and business services employment improved by 60,000.

Employment growth in the construction sector also lost steam in November, adding 27,000 positions, down from the 72,000 added in the previous month. Gains were seen in residential and nonresidential building, heavy and civil engineering as well as in residential specialty trade contractors. Nonresidential specialty trade contractors cut 1,200 positions. The construction sector has now added back nearly 80% of the jobs lost during March and April, while total nonfarm employment has added back just under 60% of the jobs lost.

Economic growth has slowed noticeably over the past several months and the labor market is beginning to stagnate as a result. There should nevertheless be some solace that employment growth was as strong as it was in November, given the considerable headwinds facing the economy. The next wave of the virus is accelerating and the prospects for additional federal stimulus are still very uncertain, so employment growth is expected to slow further in the months to come. Construction employment should remain somewhat resilient, however, due to the booming housing market. Looking into 2021, the hope for rapid deployment of a vaccine sets the table for a stronger economic recovery taking hold by the midpoint of the year.

 

 

Job Growth Slows in November

Richard Branch, Chief Economist Dodge Data & Analytics

NEW JERSEY – DECEMBER 4, 2020 – According to the Bureau of Labor Statistics, the U.S. economy added 245,000 jobs in November – a considerable step back from the revised 610,000 jobs added in October. Still, the unemployment rate dipped to 6.7%. Private sector employment improved by 344,000, while the public sector shed 99,000 positions. Within the public sector, state and local governments cut 13,000 positions, while federal employment was down 86,000 reflecting the loss of temporary workers that had been hired for the 2020 Census.

 

 

Within the private sector, transportation and warehousing added 145,000 jobs, while retail jobs fell 34,700 reflecting less seasonal hiring in brick and mortar retail and increased online shopping. Manufacturing jobs improved by 27,000, while professional and business services employment improved by 60,000.

Employment growth in the construction sector also lost steam in November, adding 27,000 positions, down from the 72,000 added in the previous month. Gains were seen in residential and nonresidential building, heavy and civil engineering as well as in residential specialty trade contractors. Nonresidential specialty trade contractors cut 1,200 positions. The construction sector has now added back nearly 80% of the jobs lost during March and April, while total nonfarm employment has added back just under 60% of the jobs lost.

Economic growth has slowed noticeably over the past several months and the labor market is beginning to stagnate as a result. There should nevertheless be some solace that employment growth was as strong as it was in November, given the considerable headwinds facing the economy. The next wave of the virus is accelerating and the prospects for additional federal stimulus are still very uncertain, so employment growth is expected to slow further in the months to come. Construction employment should remain somewhat resilient, however, due to the booming housing market. Looking into 2021, the hope for rapid deployment of a vaccine sets the table for a stronger economic recovery taking hold by the midpoint of the year.

 

Job Growth Makes Modest Progress in October

By Kim Kennedy, Director of Forecasting, Dodge Data & Analytics

BEDFORD, MA – November 9, 2020 – With the threat of COVID-19 still looming, the U.S. economy made modest progress in October as employers added 638,000 jobs to payrolls. The economy has now recovered a little more than half of the 22 million jobs lost as the economy shut down in March and April to prevent the spread of COVID-19. But gains have slowed since the early months of reopening: nonfarm employment grew at its strongest pace of 4.8 million jobs in June, but then began to slow with just 1.8 million jobs added in July and 1.5 million in August followed by a slower 672,000 in September and 638,000 in October. October’s job growth, however, may have been a little stronger if not for 147,000 temporary Census workers whose jobs ended in October. The private sector added 906,000 jobs in October, while governments shed 268,000.

 

 

Some of the strongest jobs gains in October came from the retail and leisure/hospitality sectors that were hardest hit by the downturn. In October, retailers added back 104,000 jobs and leisure/hospitality added back 271,000. These sectors, however, face the greatest perils as the winter months approach given the likely resurgence of the virus and softening economic growth as further federal stimulus efforts fail to materialize.
Construction employment grew by 84,000 in October, led by gains in specialty trade contractors (up 45,300). Heavy/civil engineering jobs grew by 18,800, while nonresidential jobs were up 13,400 and residential by a smaller 6,000.


October’s unemployment rate also fell by a full percentage point to 6.9%. More recently, Wall Street rallied last week with the strongest stock market gains since April. Most importantly, with the presidential election now decided, that uncertainty is now behind us and should lead to a stronger outlook for the months ahead. Here’s to a glass that continues to look half full.

 

Growth Does Not Mean Strength — Third Quarter Gross Domestic Product

By Richard Branch, Chief Economist

As widely expected, U.S. Gross Domestic Product shot higher in the third quarter, increasing at an annualized 33.1% — the largest quarterly increase in GDP since 1947 when quarterly figures were first tracked. The increase follows a sharp 31.4% contraction in economic output during the second quarter and a 5.0% drop in the first quarter.

Third quarter gains were widespread. Consumer spending was robust, with large increases for both goods and services as pandemic restrictions were lifted. Business investment also moved significantly higher driven by spending on equipment, while investment in nonresidential structures posted a notable decline — its third consecutive quarterly drop. Residential investment also moved higher in the quarter. On the downside, government spending contracted, driven by weaker spending at both the federal and state and local levels.

The third quarter bounce back reflects the initial round of businesses reopening and rehiring as pandemic restrictions were lifted over the summer. It does not, however, mean that the economy has returned to pre-pandemic levels of activity and regained its full health. With today’s report, the economy has recovered only two-thirds of the output lost in the first half of the year. Moving forward, the economy still faces significant hurdles including the next wave of COVID-19, election uncertainty, and diminished hope in the near-term for additional federal stimulus. Expect economic growth to move sideways in the fourth quarter and into early next year.

Employment Growth Slows in September

By Richard Branch, Chief Economist

Total nonfarm payrolls rose by 661,000 in September as momentum in the labor market eased following gains of 1.8 million in July and 1.5 million in August. Public sector employment shrank by 216,000 largely due to cuts in local government education payrolls. Private sector employment increased by 877,000 led by 318,000 jobs in leisure/hospitality, 142,400 in retail, and 73,600 in transportation and warehousing. The unemployment rate fell to 7.9% as 700,000 workers left the labor force.

 

The construction sector gained 26,000 positions during the month. Employment for specialty trade contractors rose by 17,600 while heavy and civil engineering jobs were cut by 3,400. This is the third consecutive month of losses for civil employment, perhaps a further sign that the budget crisis facing state and local governments is affecting nonbuilding construction activity. Building construction positions rose by 11,900 with nearly equivalent gains seen in residential and nonresidential jobs. In total, the construction sector has added back close to two thirds of all the jobs lost in March and April.

While not a step back for the labor market per se, this below-expectation jobs report highlights that the economic recovery is losing momentum and that significant risk exists that the economy could backslide as fears mount over rising COVID-19 cases with little hope for additional federal fiscal stimulus in the near-term. In conjunction with still very high initial claims in unemployment insurance and weak personal income growth, this month’s jobs report strongly suggests that the economy will be moving sideways as the year comes to an end. Dodge expects construction markets to do the same. Except for single family and warehousing, most construction categories are seeing little gain in activity. Until a vaccine is available and being distributed, we’re likely to continue to see unsteady improvements in the economy and construction through the latter half of next year.

Employment Gains Continue in August

By Richard Branch, Chief Economist Dodge Data & Analytics      

Total nonfarm payrolls increased by 1.4 million in August as the labor market continued the healing process from the spring’s pandemic-fueled shutdowns. While slower than the pace of gains over the past few months, the gains are a positive sign that businesses continue to rehire workers despite concerns about the potential impact of rising cases of COVID-19 in some areas of the country and the Congressional impasse over the extension of the Paycheck Protection Program. The unemployment rate fell to 8.4% in August.

 

 

Nearly a quarter of jobs added in August were in the public sector as the federal government hired 238,000 temporary Census workers and local governments added 95,000 jobs. Private sector employment rose by 1.0 million fueled by retail jobs (+248,900), professional and business services (+197,000), leisure and hospitality (+174,000), and healthcare (+90,000).

Construction gains were relatively muted during the month, adding just 16,000 jobs. Employment in building construction rose 13,400, while specialty trade contractors added 8,800. Heavy and civil engineering employment fell by 5,500 – a further sign that the budget crunch hitting state and local governments may be starting to affect infrastructure projects.

With the August gains, total nonfarm employment has added back about half the jobs lost in March and April still leaving a stunning gap of nearly 12 million jobs. Continued progress in economic growth will hinge greatly on the ability of consumers to continue to spend. Working against them, however, are continued high levels of joblessness and the expiration of enhanced unemployment insurance benefits that leave the retail and hospitality sectors particularly vulnerable. Permanent layoffs hit 3.4 million in August, an increase of nearly 2.1 million since February and a sign that there will likely be a near-term ceiling on hiring.  All in, this is a good report, but the road ahead will be filled with potholes and detours that will keep economic growth subdued through the end of the year.


 

Employment Gains Continue, But at a Slower Pace in July

By Kim Kennedy, Director of Forecasting for Dodge Data & Analytics

This month’s jobs report, while showing improvement, paints a picture of the U.S. economy where the glass is half empty. The economy added 1.8 million nonagricultural jobs in July, which would be a tremendous gain under normal circumstances. But current conditions are far from normal. The month’s progress, in fact, was far smaller than the 4.8 million increase in June or the 2.7 million in May as cases of coronavirus surged in the South. And the total number of nonagricultural jobs in the U.S. remains 12.9 million (8.4%) below where it was in February of this year, just before efforts to contain the COVID-19 virus shut down the economy.

The unemployment rate also fell by an outsized 0.9 percentage points in July to 10.2%, down from 11.1% in June and 13.3% in May. In February, however, just before the virus was declared a pandemic, the unemployment rate had dropped to a 50-year low of 3.5%. The number of unemployed persons fell by 1.4 million over the month to 16.3 million but remains 10.6 million above February’s level. The number of people who were temporarily laid off decreased by 1.3 million in July to 9.2 million, which means that about half of those temporarily laid off in April have returned to work as the economy has reopened. Unfortunately, the number of people who have permanently lost their jobs was virtually unchanged over the month and the increase in caseloads across the South has raised concerns about possible new closures.

By industry, leisure and hospitality was responsible for almost a third of the gain in total nonfarm employment with an increase of 592,000 jobs. Employment in food services and drinking places rose by 502,000 jobs, after a combined increase of 2.9 million in May and June. But employment in food services and drinking places is still 2.6 million jobs below where it was in February. Retail trade also added 258,000 jobs in July although the industry had 913,000 fewer jobs than in February. Professional and business service jobs also came in 1.6 million below February even though 170,000 jobs were added in July — and 144,000 of those jobs were in temporary help services, rather than permanent positions. Even healthcare employment was down by 797,000 compared to February, despite the 126,000 jobs that were added in July. For the construction sector, employment changed little in July (up just 20,000 jobs), following combined job gains of 619,000 in May and June. Residential construction was entirely responsible for the month’s gain. And total construction employment remains 444,000 below its February level.

While improvement in the labor market continued in July, advances slowed from the months of May and June.  With so many jobs still needed to close the gap between pre- and post-COVID-19 levels of activity, it’s hard not to see the glass as half empty.

U.S. Economy Contracts at Record Rate in Second Quarter

By Richard Branch, Chief Economist

The Bureau of Economic Analysis reported today that the U.S. economy contracted at a 32.9% annualized pace in the second quarter. This is the sharpest quarterly decline in GDP going back to 1947 when quarterly figures were first tracked. This was largely in line with our expectation of an annualized 33.4% contraction.

 

Declines in consumer spending and business investment were dramatic in the April to June quarter, although there was a slight uptick in business investment in computer equipment, perhaps as firms outfitted their employees for an extended out-of-office work schedule.

On the plus side, government spending provided a mild boost in the quarter as federal nondefense spending accelerated. State and local expenditures fell, however, as they came to grip with rapidly declining tax revenues and higher costs associated with COVID-19 preparations.

Today’s report does little to change our viewpoint that the U.S. economy is in recovery mode following the sharp contractions in March and April. Business activity has certainly picked up as the reopening process began, leading to job gains in both May and June. However, the nascent recovery is at risk as the number of COVID cases continues to climb.

In a separate report today the number of initial claims for unemployment insurance (UI) rose to 1.434 million – the second consecutive weekly increase. Should states and local areas add restrictions in an effort to quell the virus the number of workers seeking aid will surely rise. As the expanded UI benefits provided under the CARES Act are set to expire, with an uncertain outlook for their renewal, this will limit the consumer’s ability to fully contribute to growth and lead to a slowing economy in the coming months.

 


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