The service sector reached its highest level in two years and accounts for most of the new jobs. However, the Congressional Budget Office estimated unemployment of 5.3% for this year
Positive data for the US economy in the first month of the year: Private non-agricultural companies added 174,000 new employees in January, according to the ADP Research Institute. 48% of new hires were concentrated in medium-sized companies (between 50 and 499 employees), 29% in small ones (with 1 to 49 employees), and 23% in companies with more than 5,000 employees.
This is a significant rebound after the December fall – one of the worst months about Covid-19 – when around 78,000 jobs were lost. It is an indication that the US labor market is beginning to recover and coincides with the $ 900 billion stimulus package that the government approved in December. Additionally, employment is expected to continue to grow as large states like California and New York advance their vaccination campaign.
The ADP survey
which was conducted based on information from some 460,000 companies that, in turn, employ about 26 million people – came out just two days before the government publishes its report on the employment situation. in the US, in which the upward trend would be ratified. Most economists agree that there should be an increase of between 50,000 and 70,000 new jobs in January. The data coincides with the fall of two consecutive weeks in new applications for unemployment benefits .
The economy has already recovered about 56% of the 22.2 million jobs that were lost between March and April. However, the Congressional Budget Office recently said that employment would not return to pre-pandemic hiring rates until 2024.
According to ADP, the service sector drove 90% of the new jobs, especially the areas of Education and Health, Professionals and Business, Leisure, and Hospitality, because some states began to relax their restrictions.
Employment in that sector reached the highest point in the last 11 months. Of the items surveyed, 14 industries reported growth, especially real estate, rentals and leasing, construction, and wholesale sales.
In the manufacturing sector, the ISM had reported a slight slowdown in industrial activity as the increase in infections caused disruptions in the production chain. Despite this, 16 items managed to grow last month.
But while the signs are positive, the US job market still has a long way to go before it reaches its pre-pandemic levels. The Congressional Budget Office estimated that the economy will close the year with 5.3% unemployment (1.5 percentage points less than in 2020).
However, the Office projected a growth of 3.7% of the US GDP for 2021 -by mid-year, it could reach levels similar to the pre-pandemic-, although the economy is not expected to reach its maximum potential before 2025.
The expansion of the economy will largely depend on whether the government continues to be injected into American pockets. Joe Biden's recovery plan, valued at $ 1.9 trillion, met quite a bit of resistance from Republicans in Congress. While Democrats have already initiated the budget resolution that would allow the bill to be passed without Republican votes, Biden is open to bargaining a bit: the president had said he wants to increase special pandemic payments to $ 1,400 (in addition to u $ s 600 that Congress had approved in December) and although he did not agree to lower the figure, he said he could consider putting stricter limits on the beneficiaries.