Jobs in December: Don’t Blame Biden

It has been suggested that the decline in employment in December was somehow related to the prospect of a Biden presidency and full Democrat control over Congress. That is not the case. A detailed analysis of raw, non-seasonally adjusted jobs numbers from the Bureau of Labor Statistics shows that the decline is mostly in line with historic variations in employment; the only two exceptions are easily relatable to other policy factors than an incoming Biden/Harris administration.

It is common practice for the economy to lose jobs in December, but this is not visible to those who use seasonally adjusted numbers in their analysis. Relying instead on non-seasonally adjusted data – again the raw picture of the economy – we find that the jobs decline in the last month of 2020 was a bit more pronounced than over the past ten years, but by no means a trend breaker.

Compared to November, total employment contracted by 328,000. This is equal to -0.23 percent, a bit higher than the -0.13 to -0.18 percent we have seen for the most part over the past decade. Employment in the private sector fell by 135,000, or 0.11 percent. This is, again, only modestly higher than in 2011-2019.

Several industries actually added workers from November to December:

Mining, up 1,000 (0.16 percent);

Manufacturing, 65,000 (0.53);

Transportation and warehousing, 228,000 (4.01);

Wholesale trade, 27,000 (0.47);

Retail, 230,000 (1.48);

Utilities, 1,000 (0.2);

Professional and business services, 52,000 (0.25);

Financial services, 21,000 (0.24).

All in all, these industries added 725,000 jobs. The losses were concentrated primarily to three industries, with Leisure and Hospitality leading the pack. Due to renewed artificial economic shutdowns, from November to December they laid off 3.9 percent, or 513,000, of their workforce.

Education and health downsized 111,000 jobs – ostensibly in response to the tapering-off of covid-19 cases – which was equal to a half-percent decline. The construction industry was not far behind, laying off 103,000 workers (-1.4 percent). This is seasonally expectable, but it is worth noting that it is also the smallest decline in a decade, both percentage-wise and in terms of actual numbers.

Due to the seasonally expectable – but modestly larger – drops in employment in December, the private sector ended up 7.9 million jobs, or just over six percent, behind its December 2019 figure. The recovery that began already in May and sped up in the fall, came to a halt toward the end of the year.

It would be unreasonable to exclude the possibility that some employers have downsized their workforce for uncertainty over what policies a Biden/Harris administration will develop, together with a Democrat-run Congress. It is more likely, though, that employers refrained from expanding their workforce – that would be more in line with how businesses usually respond to uncertainty in their near future. The only clear policy-related changes are the losses of jobs in the leisure-and-hospitality industry, and in health care. Those are uncharacteristic for the month of December.

The next issue of the Liberty Bullhorn Economic Newsletter will analyze 2020 jobs and earnings numbers in detail, and assess the inflationary tendencies that are embedded in these numbers. Subscribe today! Only $2.99/month.