US Firms Cut Jobs In December, Clouding Economic Outlook

The assault of the US Capitol on Wednesday failed, allowing Congress to certify Joe Biden’s election victory after a harrowing day in Washington. But the challenges for the US economy endure.

A new warning sign emerged in Wednesday’s December report on private employment, according to the ADP Employment Report. For the first time since April, when the economy was crashing due to the pandemic, US companies cut payrolls. Total US nonfarm private employment fell 123,000 last month. The decline surprised economists: a 130,000 increase was expected, according to’s consensus point forecast.

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The setback is hardly surprising in the wake of persistently high jobless claims. Although the number of new filings for unemployment benefits have pulled back from the extremes during March and April, the roughly 800,000-per-week increase has been persistent in recent months — pace that exceeds the worst points in previous recessions, week after week. 

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The blowback is starting to spill over into payrolls, as the ADP report shows. “As the impact of the pandemic on the labor market intensifies, December posted the first decline since April 2020,” says Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “The job losses [in December] were primarily concentrated in retail and leisure and hospitality.”

Ian Shepherdson, chief economist at Pantheon Macroeconomics, agrees, explaining that the main source of the weakness is the ongoing blowback for traditional retailers and other firms in the services sector. “The underlying story here is the impact on the services sector from the patchwork of anti-Covid measures imposed across the country in the fourth quarter, alongside people choosing to reduce their social interactions in the face of soaring infections,” he advises in a research note.

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