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The U.S. could have misplaced jobs once more in January, however the economic system is ripe for rebound


The U.S. job market could use a shot in the arm too, just like the millions of Americans who are receiving potentially life-saving vaccines for the coronavirus.

The economy lost jobs in December for the first time since the pandemic broke out, and employment could fall again in January, the Labor Department reports next Friday. Wall Street consensus points to a meager increase of 55,000, but many forecasters believe a second straight decline is in sight.

See: MarketWatch Economic Calendar

In this case, job losses are likely to focus again on leisure and hospitality. That is, restaurants, bars, theaters, amusement parks and hotels.

In this part of the economy, employment fell by nearly 500,000 last month, the largest drop since last April.

Read: Consumer spending will fall at the end of 2020 and will affect the economic recovery

The good news? Most companies are actually doing pretty well, and the weakness may not last long. Employment rose in most parts of the economy in December.

“The rest of the economy looks fine,” said PNC Financial Services’ chief economist Gus Faucher. “The economy should recover as the weather gets better and vaccine adoption picks up pace.”

Lewis Alexander, Nomura’s chief US economist, is more optimistic. He predicts an increase of nearly 300,000 jobs in the private sector (250,000 total). He also assumes that the official unemployment rate will decrease by a tick to 6.6%.

Why so? He points to rising restaurant reservations at OpenTable as a sign that the lifting of business restrictions in states like California, New York, and New Jersey has allowed more people in the food service industry to return to work.

Other business areas such as construction, manufacturing and professional services are also constantly creating new jobs.

Manufacturers have largely recovered from the worst of the pandemic, builders are experiencing the biggest real estate boom in 14 years, and employees have barely missed a blow.

Is there anything on the January jobs report that could sound the alarm as stocks are not far from record highs and Wall Street is looking for a stronger economic rebound later this year?

If the loss of jobs, leisure and hospitality spread to other areas, it would be a bad sign. The greater the damage to the economy from the recent coronavisus surge, the longer and more protracted the recovery.

“If the job loss spreads to other industries, I would be more concerned,” he said.

Read: The US economy grew at a slower 4% in late 2020, as GDP shows

Even if that is the case, growing optimism about a strong rebound over the course of 2021 is certain to continue to mount.

For one, the nationwide coronavirus vaccination program is accelerating and Washington is taking the lead.

Congress approved nearly $ 1 billion in fresh aid to the economy for the Trump administration in the last few days, and President Biden is pushing for additional $ 1 trillion incentives.

“The good news is that both vulnerabilities – fiscal policy and COVID – will no longer be an issue in the future [the first quarter] and beyond, ”said Aneta Markowska, Chief Economist at Jefferies LLC.

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