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What to Make of December’s Dismal Jobs Report

Employers in December cut 140,000 jobs from their payrolls, versus an expectation by economists for an addition of 50,000.

The unemployment rate was unchanged at 6.7 percent and the number of unemployed individuals remained at 10.7 million, the U.S. Bureau of Labor Statistics (BLS) said on Friday. “Although both measures are much lower than their April highs, they are nearly twice their pre-pandemic levels in February, 3.5 percent and 5.7 million, respectively,” it said.

“The decline in payroll employment reflects the recent increase in coronavirus cases and efforts to contain the pandemic,” BLS said. It had one bit of good news for retail—December job losses primarily stemmed from leisure and hospitality, partially offset by gains in professional and business services, retail trade and construction. BLS data showed that retail added 121,000 jobs in December, with nearly half of the growth occurring in the general merchandise retailer category that includes warehouse clubs and supercenters. Job growth in the quarter also saw gains in nonstore retailers, essentially online operations, which gained 14,000. Overall retail employment was 411,000 lower than in February.

“For the first time since May, the unemployment rate failed to decline, holding at 6.7 percent, while the labor force participation rate was also unchanged at the depressed rate of 61.5 percent,” Sara House, Wells Fargo’s senior economist, said. “Yet if there is a bit of good news in today’s report, it is that layoffs were skewed toward temporary separations, which keep workers more closely connected to employers and should facilitate faster re-hiring when activity strengthens.” She noted that the latest round of Covid relief could help speed the labor market’s recovery with $285 billion in Paycheck Protection Program loans and targeted emergency grants helping small businesses retain more employees, even as the “next few months are likely to remain bleak in the jobs market as the pandemic continues to rage.”

Drilling down further on BLS data from December, the number of people jobless for less than five weeks rose by 449,000 to 2.9 million, while those left jobless between 15 to 26 weeks fell by 303,000 to 1.6 million. Those considered long-term unemployed for 27 weeks or more were essentially unchanged at 4.0 million in December, a 2.8 million uptick since February, BLS said. Furthermore, the number of people jobless for 27 weeks or more accounted for 37.1 percent of the total unemployed in December.

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In addition, the number of people employed part time for economic reasons, at 6.2 million, fell by 471,000 over the month, and while down from the April high of 10.9 million, was also 1.8 million higher than February levels. BLS data revealed 15.8 million people in December reporting that they had been unable to work because their employer either closed or lost business due to the pandemic.

U.S. retail has rapidly evolved to meet shifting consumer needs, especially toward digital commerce. Many in the retail sector are trying to figure out how best to adapt to the changing landscape. Simon Property Group and Brookfield Asset Management, two large mall owners, even went so far as to acquire the operating business of the JCPenney banner. Retail consultant Walter Loeb has said that the two shopping center owners likely felt a need to make the acquisition to keep their important anchor tenant in place so as not to trigger co-tenancy clauses in other mall-based leases. Those co-tenancy clauses essentially are worded to give retail tenants the ability, under certain conditions, to exit their leases if anchor tenants pull up stakes. That’s because an anchor tenant often serves the important role of attracting foot traffic along different mall sections, which can be attractive to specialty chains seeking that very same customer base. A quick check with factors in the industry indicates that they also share Loeb’s opinion.

Separately, Brookfield Asset Management and a group of investors have offered to acquire the 40 percent stake in Brookfield Property Partners that they don’t already own. That offer, valued at $5.9 billion, would take the real estate firm private. Brookfield also operates the publicly-traded real estate investment trust, Brookfield Property REIT Inc. The offer has been extended to REIT investors as well. The proposal is currently under review by the Brookfield Property Partners’ board of directors.