U.S. employers added 49,000 jobs last month, returning growth to the labor market after a one-month dip, while the unemployment rate fell to 6.3%.

The small January gain came after payrolls fell steeply in December, the first decline since the coronavirus pandemic triggered business shutdowns last spring.

Jobs grew strongly in business and professional services, the Labor Department said in its January report on U.S. employment. Many sectors, though, lost jobs last month. The leisure and hospitality sector lost 61,000 jobs in January, following a steep decline of 536,000 in December. Retailers, health-care companies and warehouses cut jobs in January.

The unemployment rate decline in January was driven by two factors. More people dropped out of the labor force—meaning they weren’t actively looking for a job and may have grown frustrated with their employment prospects. Also, the number of people reporting themselves as employed increased, consistent with a generally upward trend in hiring since last spring.

The Labor Department noted that figures from the household survey, which is used to calculate the unemployment rate, aren’t directly comparable from December to January due to its annual update in population controls.

The broader economic recovery stalled significantly this winter. Unemployment claims, a proxy for layoffs, have remained above pre-pandemic levels. Consumers cut back on spending, as some were wary of leaving their homes as virus cases surged. Others wanted to shop and dine out, but had limited options.

Late last year, many states and local governments mandated that businesses like restaurants close or reduce operations to combat rising numbers of virus cases. Some places have recently loosened those restrictions. Positive areas include manufacturing, with companies reporting increased demand for goods and new hiring, and housing, where low interest rates and the pandemic have boosted demand.

Economists see the winter lull as temporary. They expect growth to pick up later this year as more people get vaccinated and business restrictions further ease. Many economists also say the economy could benefit from further government stimulus. Congress is considering as much as $1.9 trillion in additional financial aid to help households and businesses. The proposal would bolster unemployment aid, provide funds for vaccine distribution and send $1,400 checks to many Americans.

Employment at restaurants and bars has been particularly hard hit this winter and drove overall payrolls down in December. Warmer temperatures will likely help lift the industry in the coming months.

“When the sun comes out down here, and we can get some people out on some patios, we’re going to do a lot better,” said Chris Hall, operating partner for an Atlanta-area restaurant group that includes a deli, a bar, a contemporary American restaurant and a pizza place.

Mr. Hall said his restaurants rehired workers after reopening from temporary closures last spring, but overall staffing levels have hovered near 75% of pre-coronavirus levels since the summer.

“This winter has gotten scary,” he said. The restaurants’ patios are closed and customers remain cautious to dine out amid high virus counts, Mr. Hall said. He recently sent out a message to a group of “die-hard” customers, encouraging them to come support business during a tough winter for sales.

A strong community of customers has helped Mr. Hall’s restaurants survive the pandemic so far, he added.

Some industries, particularly ones that build and deliver goods, have fared well in recent months. Friday’s report will reveal whether manufacturers, home builders and warehouses continued to churn out jobs.

Consumers have been ramping up orders of items to spruce up their homes, aiding growth at United Solutions Inc. The 665-person manufacturer produces trash and recycling bins, plastic storage and paint buckets out of plants in Massachusetts and Mississippi.

It hired 56 workers in January and is seeking to add 100 more employees to its warehouse and factory floors to meet customer demand, said

David Reilly,

chief executive of the manufacturer.

“We’re just trying everywhere to find the right people,” Mr. Reilly said. “It’s a challenge.”

Diners ate under a tent in the parking lot of Red Crown in Grosse Pointe Park, Mich., last month. Employment at restaurants and bars has been particularly hard-hit this winter.



Photo:

Paul Sancya/Associated Press

To attract and retain workers, the company raised starting wages for factory workers by $2 over the past six months to $14 an hour. It is airing job ads on the radio and participating in virtual job fairs. The company is also converting many temporary workers—formerly the bulk of its workforce—to permanent positions.

Companies might struggle to find workers in part because the share of people seeking work remains depressed. The labor-force participation rate was 61.5% in December, down from 63.3% in February, before the virus hit. Some people aren’t looking for work out of fear of contracting the virus. Others are burdened by increased child-care responsibilities or discouraged by limited job opportunities.

The U.S. unemployment rate shot up faster than in any other developed country during the pandemic. WSJ explains how differences in government aid and labor-market structures can help predict how and where jobs might recover. Video/Illustration: Jaden Urbi/WSJ (Originally Published Sept. 4, 2020)

The U.S. continues to face challenges to achieving a full economic recovery. More-transmissible variants of Covid-19, the disease caused by the virus, could keep businesses closed longer. Nearly a quarter of unvaccinated adults said in a Census Bureau survey they won’t get the Covid-19 vaccine, potentially delaying herd-immunity prospects and business reopenings.

Many workers are facing long spells of unemployment. Others who lost their jobs earlier in the virus crisis have regained employment, but at much lower wages.

Danielle Robillard, 55 years old, of Troutdale, Ore., was furloughed as a team lead at a corporate travel agency in April. Her job loss turned permanent in September, when she opted to take a company severance package.

She ramped up her job search and was hired in October as an associate expert at

T-Mobile,

where she answers customers’ questions on phone bills and payment plans. Her new position pays $14.75 an hour, or about half her previous wage, leaving her stretched financially.

“If it was enough to pay my mortgage, I wouldn’t be so terrified,” Ms. Robillard said. Her husband works as a restaurant cook, which means his employment is insecure until vaccines are widely distributed, she added.

Ms. Robillard continues to seek a new job both within and outside of her current company. “The problem is that half the country is looking for a job,” she said.

Write to Sarah Chaney Cambon at [email protected]

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