US Unemployment Rate Fell 6.3% in January as Hiring Picks Up

Source:G-Stock Studio, Shutterstock

Summary

• Some 49,000 people have re-joined the US workforce in January.
• Businesses are gradually resuming operations as virus concerns ease.
• Markets anxious on Congress pending verdict on Biden’s USD 1.9 trillion relief plan.

US unemployment rate fell to 6.3 per cent in January as employers resumed hiring, but the job market would still take time to nurse back to health fully.

According to the Labor Department data released on Thursday, some 49,000 people have rejoined the workforce in January, bringing some good news to markets shrouded by Covid tensions.

The number of federal unemployment pay-outs to individuals saw a decline for the last three constitutive months from a relatively high in the second half of last year amid vaccine uncertainties.

The jobless rate was 6.7 percent in December. But these figures are still significantly high compared to the pre-pandemic days. Some 10 million more jobs would be needed to reach that level.

The hiring momentum, especially in temporary help roles, has picked up in the US as businesses gradually begin to resume operations, the Labor Department said.

The government has stepped up vaccinations, while an ongoing talk on a new Covid relief package has helped allay people’s fears of a prolonged economic uncertainty engulfing their lives. 

Sectors, like retail, travel and tourism, transportation, leisure, and hospitality have borne the brunt of the pandemic in which thousands of people had been laid off.

While the positive labor report shows signs of a gradual recovery, many people who were earlier employed may have opted out of the job market to look for other greener pastures. The data also shows the number of people reporting themselves as employed increased during the period.

The markets are expected to perform better in the coming weeks as the pace of vaccination and other disease prevention measures of the government gain steam.

Currently, the markets are weighing on the government’s next actions to revive the economy. The Biden administration has proposed a USD 1.9 trillion economic relief package. It is in addition to the USD 900 billion announced by Donald Trump before leaving office. 

While huge sums of money are being poured into the economy, doubts remain in some quarters over how the funds would be allocated, and how they would get to use them. Until Congress gives its verdict on Biden’s proposal, markets to remain anxious. Biden wants a bipartisan agreement on the deal.

However, Senate Republicans negotiating the deal with their Democratic colleagues voiced concern over the fiscal deficit problem that can arise from the new spending. Until the final verdict, the markets would adopt a wait-and-watch policy. Hiring would pick up when these doubts are cleared.  

Furthermore, the concerns over a new virus strain may prove a speed-breaker to the efforts. Much would depend on how the government tackles the emerging challenge. Production of Covid vaccines have been at a break-neck speed, but success would depend on how effectively they reach the public. 

Despite these hurdles, the industries are gradually opening-up which would ease the current stress in the job market going forward.