Jobs: Big December Loss Coming

The U.S. labor market should suffer another indignity in December to close out a miserable year. After a massive nonfarm payrolls decline of 533,000 in November—the worst monthly job loss since December 1974—we at Action Economics expect another supersize payrolls drop of 480,000 in the December employment report, scheduled for release Jan. 9.

Similar to November's numbers, the mix of payrolls by industry should continue to show widespread weakness, with factory employment a particular focus. Manufacturing jobs are expected to fall by 110,000 in December, given ongoing weakness in various manufacturing reports. The weekly initial jobless claims data and continuing claims figures have seen increased volatility with the holidays, although both series hit their highest level since 1982 between the November and December Bureau of Labor Statistics survey weeks—when the government gathers the data for the monthly report—though both series posted modest corrections in the December BLS week itself. After the BLS survey week, both series posted another round of new highs, extending the deteriorating trend. Yet for the service sector, the December ISM nonmanufacturing report proved stronger than expected, as did the employment component index, suggesting some upside risk to December payrolls that offsets the downside risk implied by the factory sentiment measures. The headline index rose to 40.6 in December from 37.3, while the employment component bounced to 34.7 from 31.3, implying some upside risk to our December ex-factory payroll estimate of -370,000.

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