Unemployment Claims Fall, but Labor Market Remains Turbulent

The Labor Department’s monthly employment report, due Friday, is expected to show that employers added about 100,000 jobs in January, a modest rebound after a net loss of 140,000 in December. But there is a great deal of uncertainty around that estimate: Forecasts compiled by Bloomberg range from a loss of 250,000 jobs to a gain of 400,000.

In any case, the report is likely to show that the slowdown in hiring that began last fall continued into the new year. That is worrisome, because the economy still has nearly 10 million fewer jobs than before the pandemic. At a pace of 100,000 extra jobs a month, it would take years to make up the gap.

“That’s a good number in usual times, but in a period where we’re still down more than nine million jobs, that’s not fast progress,” said Nick Bunker, an economist at the job site Indeed. “We would have to see an astronomical upside surprise for me to think that we’re out of any slowdown period.”

Even if the January job showing is better than expected, it may reflect statistical quirks rather than a true improvement in the economy. The figures are adjusted for normal seasonal patterns, like holiday hiring. But the pandemic disrupted those patterns, leading to less holiday hiring and therefore fewer post-holiday layoffs. That could make gains look artificially strong on a seasonally adjusted basis.

Last week, the government reported that the economy grew only 1 percent in the fourth quarter of 2020, a subdued finish to a volatile year. Although stronger growth is expected for 2021, most forecasters say the economy won’t really move into full recovery mode until mass inoculations cover the bulk of the population.

“We expect the labor market recovery to be tepid in the first quarter,” Mr. Deull of IHS Markit said. “The key is to crush the virus.”

Ben Casselman contributed reporting.

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