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U.S. economy added just 49,000 jobs in January, signaling ongoing fragility of labor market

"We’re still in the dark days of winter with respect to the pandemic and the economy,” one economist said.
Magazine Dining Column on Lutece
A server tends to outdoor diners in the heated cabins at Lutece restaurant on Jan. 29, 2021 in Washington, DC.Scott Suchman / The Washington Post via Getty Images

The economy added a meager 49,000 jobs in January and the unemployment rate fell to 6.3 percent as the size of the labor force shrank, signaling the ongoing fragility of the recovery. Economists had expected 50,000 jobs to be added and the jobless rate to remain unchanged.

January's report, the first monthly release under President Joe Biden, is an improvement from December, which saw a reversal of 227,000 jobs. However, it does not even capture the millions of people economists estimate have dropped out of the labor force and are no longer looking for work. Nearly 18 million Americans continue to receive unemployment benefits of some kind.

"The headline numbers fail to capture all of the distress," said Mark Hamrick, senior economic analyst at Bankrate. "Just one example: Some 6 million are working part-time but want full-time work, while another 7 million are out of the labor force but want to work and aren’t counted as officially unemployed. I think we’re still in the dark days of winter with respect to the pandemic and the economy.”

With a significant portion of the economy still shut down, the monthly figure is still four times the pre-pandemic level.

“Once the vaccine starts to gets widely distributed and our case counts start to go down, there is going to be a pop," said Philip Noftsinger, executive vice president at CBIZ, Inc., a consulting firm that tracks small business employment trends.

Economists and policymakers alike say American families and mom-and-pop businesses will need more support to survive until the spring. “The consumer is going to be spending when things open back up. We just have to get there,” Noftsinger said.

Although more locations around the country are easing restrictions, Noftsinger said people’s reluctance to shop, dine out and engage in other social activities is a “soft cost” these businesses bear. Even in the absence of restrictions, there is a fear factor that weighs heavily on Main Street’s ability to rebound. “Small businesses are still struggling,” he said.

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A new report by the Congressional Budget Office concluded that it will take until 2024 for the economy to reach full employment again, and Treasury Secretary Janet Yellen said the country “desperately” needs more aid. President Joe Biden and Congressional Democrats are pushing for a $1.9 trillion package that would include $1,400 stimulus checks for many Americans.

Economists who have warned for months of a K-shaped recovery said this level of support is necessary because the pandemic continues to inflict pain unequally. In particular, it has left the travel, dining and entertainment sectors lagging badly. A more robust economic recovery that includes these sectors has been hamstrung by worrisome new virus variants and a slow, disjointed vaccine rollout. “We need to see more jobs added in leisure and hospitality. That’s ground zero for the jobs we lost,” Hamrick said.

While Americans are still buying, spending on services remains very low, he added. “This speaks to the fact that the economy still has a way to go even to gain further healing.”