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Hospitality industry drives US job losses in December 2020 amid COVID-19 spike

The leisure and hospitality industry led U.S. job losses in December 2020 amid a surge in coronavirus cases and stricter pandemic restrictions.

The U.S. economy lost 140,000 jobs in December, the first monthly decline since April 2020. The forecast by economists polled by Econoday called for the creation of 50,000 jobs.

December's jobs report "provides clear evidence that we can't expect the labor market to recover until the pandemic is over," said Erica Groshen, ex-commissioner of the Bureau of Labor Statistics and senior labor economics adviser at the Cornell University School of Industrial and Labor Relations. The leisure and hospitality sector lost jobs mainly because of people being cautious and changing their behavior to curb the spread of the virus, she said in an interview.

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The leisure and hospitality industry shed 498,000 jobs last month, down 3.7% from November 2020, according to data from the U.S. Bureau of Labor Statistics. Food services and drinking places, a sector within leisure and hospitality, lost 372,000 jobs during the month.

The retail sector, meanwhile, posted a month-over-month gain of 0.8% in December 2020 at 121,000 jobs, with gains concentrated in general merchandise stores.

"I was surprised that retail employment was so robust in December," Stephen Stanley, chief economist at Amherst Pierpont Securities, told S&P Global Market Intelligence. "It appears that brick-and-mortar stores added seasonal workers but did so considerably later than in normal years, which makes some sense, as you would not want to bring on workers earlier than they were direly needed in a pandemic," he said via email. Companies including Target Corp., The Gap Inc. and Walmart Inc. hired workers for the 2020 holiday season.

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Quincy Krosby, chief market strategist at Prudential Financial, said via email that it is interesting that retail hiring picked up despite the surge in online holiday shopping.

U.S. retail sales increased 3% during 2020's holiday season as e-commerce sales jumped nearly 50%, Reuters reported Dec. 26, 2020, citing a report by Mastercard.

"Hiring should continue to pick up, albeit slowly as the virus recedes and vaccine distribution and inoculations gain momentum," Krosby said, referring to hiring in the retail sector.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Experts noted that recovery is going to take time and that its pace will be determined by the speed of the vaccination rollout and structural changes required as a result of the crisis.

"The speed of our recovery is going to depend on how many structural changes we have to go through because of things we have learned as a consequence of the pandemic," Groshen of Cornell said. "The more we have to restructure the slower the recovery will be," she said, adding that hiring in the retail, leisure and hospitality sectors is going to depend a lot on the virus and vaccination rate.

Prudential Financial's Krosby echoed similar thoughts, saying the employment landscape will not improve until COVID-19 vaccinations gain momentum. "With 3/4 of the vaccines now available not being utilized for inoculations, the need for a coordinated effort to improve the rollout is dramatic," she added.

The number of unemployed people who were on temporary layoffs increased by 277,000 in December 2020 to 3 million, while the number of permanent job losses declined during the month for the first time in eight months to 3.4 million.

A separate report showed Jan. 7 that applications for U.S. unemployment benefits fell to 787,000 in the week ended Jan. 2 from the previous week's revised reading of 790,000.

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