Covid, covid, covid, politics, politics, politics. The new year has yet to show much of a break from 2020. The December Employment Report reflected an impact from the pandemic surge and further job losses in state and local government, but wasn’t bad otherwise. Democratic victories in Georgia’s run-off election mean a shift in Senate control (a 50-50 mix, but Vice President-Elect Harris will be the tie-breaker). There was an insurrection on Capitol Hill, as lawmakers were in the process of ratifying the November election results.
Nonfarm payrolls fell by 140,000, but with an upward revision of 135,000 to the two previous months. December weakness was concentrated in restaurants and bars (-372,000) and state and local government (-51,000). Otherwise, nonfarm payrolls rose by 232,000 and private-sector payrolls rose 277,000. Throughout the pandemic, face-to-face industries have remained depressed. State restrictions (as well as self-preservation) have stalled a rebound in restaurants and bars. With cases (and deaths) continuing to surge, the labor market outlook for early 2021 will remain mixed.
The unemployment rate held steady at 6.7%, but with the rate for prime-age workers (age 25-54) falling from 6.1% to 5.8%. Teenage unemployment rose from 13.9% to 16.0% and the rate for young adults (aged 20-24) rose from 10.7% to 11.2% (high school and college students often take temporary seasonal jobs in December).
The Democrats now have a narrow majority in the Senate (and they continue to control the House). Sixty votes are still required to get stuff done in the Senate, unless you go through budget reconciliation (which only requires a simple majority). However, you only get one bite at that apple per year. With such a narrow majority, each Senator becomes the critical marginal vote. Major legislative changes will be difficult to achieve – hence, the stock market’s acceptance of what is expected to be a (mostly) divided government. Still, the Biden/Harris administration will be active, especially in the first 100 days. The pandemic response will be the primary initial focus, but climate change, income inequality, and antitrust issues are on the menu.