A Covid-19 surge in the US led to 140,000 jobs disappearing from the economy in December – but the surprise hit to employment could increase pressure on the incoming Democrat leadership to increase stimulus.
The US economy lost jobs for the first time since the early days of the Covid-19 pandemic, as a resurgence in infections knocked back any sort of economic recovery over the summer and autumn.
The unemployment rate stood at 6.7% in December.
Nonfarm payrolls, the leading US jobs indicator in the US, fell by 140,000 jobs last month, the Labor Department said.
It marks the first job decline since April.
Ulas Akincilar, head of rading at trading platform Infinox said the bad news could prompt a larger stimulus package from the US government, which may explain why Wall Street is up this today.
“Such a colossal miss on the headline jobs number would ordinarily send the markets into a flat spin.
“But though the news was bad, it was just bad enough to be taken as good by equity markets.
“The reason is the growing assumption that America’s flagging jobs market will serve as a canary in the coalmine – and prod Congress into rushing through a big fiscal stimulus.
However, data for November was revised up to show 336,000 jobs added instead of 245,000 as previously reported.
The economy has recovered just over half of the 22.2 million jobs lost in March and April.
Richard Flynn, UK Managing Director at Charles Schwab, said potential lockdowns in US states remain a key risk for the jobs market.
“Encouraging news about Covid-19 vaccines has boosted hope for stronger economic growth, kicking off a rotation in stocks and equity sectors as investors look to a brighter future.
“However, the US economic recovery has narrowed and will likely continue to struggle, as we’re not yet out of the coronavirus tunnel.”
Neil Birrell, chief investment officer at Premier Miton Investors laid out the challenges for President-elect Joe Biden who will be sworn in to the White House in less than two weeks.
“The number of long term unemployed is also staying stubbornly high.
“There will be significantly increased pressure on the Biden administration to step up to plate with a big Covid relief package, with estimates already hitting 1 trillion dollars; that may well not be enough to keep markets happy.”