The U.S. economy stumbled on target towards the end of 2020. The recovery from the coronavirus pandemic slowed and there was a risk of job losses for the first time since the pandemic broke out last spring.
Wall Street forecasts a modest spike in job creation in December when the government releases its final monthly employment report for 2020 next Friday. But economists' predictions are widespread: estimates range from a modest increase of 200,000 jobs to a decrease of 175,000, which would mark the first decline in seven months.
See: MarketWatch Economic Calendar
Add to that the confusion: a potentially major disruption to normal hiring patterns during the holiday season.
Certain companies such as retailers have fewer employees in stores than usual, while shipping companies such as UPS
The delivery service added more staff to distribute packages.
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Aside from a surprisingly large surge in attitudes, the outcome is unlikely to matter much to financial markets. Inventories have increased in anticipation of the wider availability of COVID-19 vaccines, which will spur economic growth through 2021.
However, the details of the December job report will underscore how far the US needs to go. The economy has only recovered just over half of the 22 million jobs destroyed in the first two months of the pandemic, and hiring fell sharply in the waning months of 2020.
Even the surprising decline in the unemployment rate from a pandemic peak of 14.7% to 6.7% underestimates the recovery in the labor market.
Actual unemployment is likely several points higher, say economists, and that doesn't even include about 4 million people who have left the labor market and are no longer included in the official unemployment rate.
Read: US consumer confidence fell in December
The main industries are retail, leisure, hospitality, and entertainment.
Businesses such as restaurants, hotels and theaters have again been burdened by government restrictions on opening hours and the number of customers allowed on the premises. They bore the brunt of the damage in the spring and again in the winter.
"Restaurant activity across the country fell sharply [in December] as many states restricted indoor eating," said Lewis Alexander, chief US economist at Nomura Securities.
The damage will likely continue for at least a few months. Even if the vaccines work as promised, the initial introduction was slower than expected and it will take many months for most of the population to be vaccinated.
Smaller businesses and companies that deal directly with customers are likely to struggle until the pandemic subsides, forcing them to either lay off workers or hire new ones.
Although December's employment report is the main event, the first week of January will be a flood of economic reports.
Wall Street will be paying special attention next week to weekly jobless claims and two ISM corporate surveys, which will provide more insight into how badly the economy deteriorated in December.
Read: Unemployment claims are falling below 800,000, but layoffs are still high
After a short pause, the focus will also be on the Federal Reserve again. An army of senior central bank leaders will make a series of public appearances to express their views on the economy over the coming months.
Minutes of the Fed's December meeting on Wednesday will also shed more light on how the central bank plans to strengthen the economy in 2021.