SBE Small Business & Entrepreneurship Council : Brakes Hit on Jobs Recovery in December

By SBE Council at 8 January, 2021, 11:23 am

by Raymond J. Keating-

After breathtaking losses in employment in March and April of 2020, a struggle to recover those jobs began in May and persisted, unevenly into November. However, as the latest report from the U.S. Bureau of Labor Statistics shows, that clawing back of jobs stopped in December.

Establishment Survey

The establishment survey showed that nonfarm payrolls declined by 140,000. Employment in leisure and hospitality plunged by 498,000, and private education dropped by 63,000.

Meanwhile, there were notable gains in professional and business services (+161,000), retail trade (+121,000), construction (+51,000), and transportation and warehousing (+47,000).

Household Survey

Meanwhile, the household survey, which better captures small business and startup activity, pointed to a meager gain of 21,000 jobs in December.

Given the volatility in the household data, this largely points to a flat labor market in December. Indeed, key measures of the labor market were unchanged compared to November.

The labor force participation rate stood at 61.5 percent and the employment-population ratio at 57.4 percent.

It must be noted for proper perspective that those levels are down markedly from the pre-pandemic start of 2020, i.e., a labor force participation rate of 63.3 percent in February, and an employment-population ratio of 61.1 percent in February.

Self-Employment Data

Finally, it's worth taking a look at the self-employment numbers to get a feel for what's occurring in terms of entrepreneurship. The numbers arguably had held up better than expected during much of the pandemic and related shutdowns. However, unincorporated self-employment took a big dive in December (seasonally unadjusted data must be compared to same time last year). The December 2020 level of 5.86 million was down from 6.55 million in December 2019.

As for unincorporated self-employed, they were down as well in December, but less markedly. Seasonally-adjusted data show the unincorporated self-employed registered 9.46 million in December 2020. That was up compared to November's 9.41 million, but down compared to 9.6 million in December 2019.

The Long Road Ahead

The December jobs report points to the difficulties that still remain for our economy - especially with the recent dramatic increases in COVID-19 cases and deaths - including the long road ahead to fully recover our economic losses, and start actually growing again.

The vaccines offer us a light at the end of the tunnel, but how long and dark the rest of that tunnel is uncertain.

Policymakers need to understand that just as pharmaceutical companies have led the way in terms of doing near miraculous work in coming up with vaccines in record time, it will be entrepreneurs and investors who will lead the way in rebuilding and creating businesses and jobs.

Policymaking needs to reflect that economic reality, which means policies need and refrain from creating barriers and new costs that would impede this critical activity.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.