U.S. gains just 49,000 jobs in January. Labor market still under acute stress

MarketWatch.- The U.S. regained a meager 49,000 jobs in January and the unemployment rate fell again, but the economy is still struggling to recover after a record coronavirus surge induced more layoffs at the end of last year.

The increase in employment last month matched Wall Street’s forecast. Economists polled by Dow Jones and The Wall Street Journal had expected a 55,000 gain.

The U.S. had lost jobs in December for the first time since the onset of the pandemic after coronavirus cases soared again. Many states reimposed business restrictions at the end of last year and restaurants and hotels had to lay off workers, some for the second or third time.

With Covid cases declining again, most restrictions have lifted and more people are returning to work or finding new jobs. Yet the winter coronavirus spike sapped the economy of momentum and left millions of people on the unemployment rolls. Some 10 million jobs that vanished in the early stages of the pandemic still haven’t returned.

The U.S. unemployment rate, meanwhile, fell to 6.3% in January from 6.7% and hit a new pandemic low. The decline stemmed largely from fewer people being in the labor force.

Economists say the true level of joblessness is several points higher. A big reason: Several million people who dropped out of the labor force because they couldn’t find work aren’t counted in the main unemployment rate.

In premarket trades, stocks were set to open slightly higher.

The big picture: The economy is sure to grow faster this year and add millions of lost jobs if the coronavirus vaccines turn out to be very effective. That would give a boost to an already frothy stock market.

Yet progress is likely to be slow over the next few months with most of the population still waiting to get their shots . The longer the recovery takes, economists warn, the greater the risk that many jobs will never return.

Market reaction: The Dow Jones Industrial Average DJIA, +1.08% and S&P 500 SPX, +1.09% were set to open higher in Friday trades.

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