The U.S. added a modest 49,000 jobs in January, below economists’ expectations, although reversing a decline in jobs reported in December. The unemployment rate dropped to 6.3 percent. For January, the Conference Board Employment Trends Index (ET) also increased, its ninth consecutive monthly increase since May 2020. While the index now stands at 99.27, up from 98.55 up in December, it is currently down 10 percent from a year ago.

“The employment level is still nearly nine million jobs lower relative to pre-pandemic levels,” says Gad Levanon, head of The Conference Board Labor Markets Institute. “The labor force participation rate slightly declined to 61.4 percent, and unlike the unemployment rate, it is not showing signs of improvement in recent months.”

Digging deeper into the number of the U.S. Bureau of Labor Statistics Employment Situation Report, Levanon says, “In January, the number of jobs in the leisure and hospitality sector continued to decline, but much less rapidly than in December. Sectors that had been doing well, such as manufacturing, warehousing, and retail, were weak in January. On the positive side, the most notable increase, 80,900, was in the temporary help industry, one of the most reliable leading indicators of employment, suggesting that job growth may improve in the coming months. The number of new infections in the U.S. peaked in early January, after which it has been sharply declining. However, the labor market continues to be at risk of job losses. Over the next couple of months, there will be two competing forces that will determine how the labor market will expand: new strains of the coronavirus, which may spread more rapidly, and the distribution of vaccines.

The Conference Board’s ETI aggregates eight labor market indicators, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly. January’s increase was driven by positive contributions from five of the eight components.

Speaking on the ETI, Levanon adds, “The Employment Trends Index has been increasing in recent months, with the largest contributing component being the number of jobs in the temporary help industry. Over the next few months, expect some uncertainty around job growth, especially if some potentially adverse COVID-19 developments manifest—namely, the rapid spread of more aggressive virus strains. On the upside, however, by spring we expect strong job growth to resume and continue throughout the remainder of the year. By late spring, we expect that the number of new infections will be significantly lower due to the rollout of vaccinations, possibly prompting businesses to start adding jobs again at an accelerated pace. Most of the job gains are expected in in-person services such as restaurants, hotels, recreation, passenger transportation and childcare services. Between now and the end of the year, the unemployment rate could drop to about five percent.”