ADP let the cat of the bag on Wednesday when the payroll processing provider announced it believed the level of private employment had declined in December 2020. Since it wasn’t likely to have been wildly inaccurate, it set the stage for a renewed negative number in the main government payroll report released today.

According to those BLS’s Current Employment Statistics (CES), the Establishment Survey did indeed fall. During the month of December, the agency believes that somewhere around 140k payrolls had been lost, about 95k of which were in the private sector.

With renewed COVID restrictions (overreactions) being set in place, the majority of any job losses was predictably concentrated in the leisure and hospitality industry. Closing and constraining the activity at more bars, restaurants, and tourism destinations led to just less than half a million fewer payrolls. While this wasn’t surprising, it also isn’t the major takeaway.

The real issue is the whole rest of the economy (including those states which haven’t given a second look to lockdown measures) isn’t making up for it. According to these latest numbers, the system remains stuck about halfway back from the bottom; an unthinkably large deficit near around 10 million (for reference, at the lowest point of the Great “Recession”, cumulative payroll losses had been 8.7 million).

There is also the issue of time which is now adding considerably to that shortfall. In other words, the target for recovery here isn’t just to make back what has been lost since February, rather it’s to get all the way back to where the economy would’ve been had the (largely unnecessary) disruption not occurred.

Because it has gone on so long, we are both short about 9.5 or 10mm in lost jobs plus more than 1.6mm (being conservative) payrolls that should’ve been added which were not. Furthermore, at the rate things have been going over the last few months, the rebound isn’t even enough to keep up with that meager pre-March baseline.

The labor market is falling further behind.

This isn’t about stocks, financial risks, or inflation, really; it’s about people.

Part of it has to do with what’s hidden within even these low-level figures. Labor market damage is not, and has not been, limited to the unemployed. So far as any government “stimulus” may be concerned, the problem isn’t so much just lost potential due to lost income of those falling on hard times because they’ve been laid off. Even those who are and remain employed are being seriously and negatively affected, too (as are, obviously, small business owners; since this is about employees rather than employers that will be our focus here).

To give you an example and a sense of these less visible aspects, but those which are directly impacting workers anyway, the BLS’s Household Survey (CPS) has been collecting additional data on labor disruptions beyond the usual layoffs and such. The government has been asking survey respondents to give it a sense of short-term disturbances to regular business activity, too.

According to the figures provided by this CPS “supplemental”, about 9 million workers would say that at some point during the four weeks of December they had been unable to work or had lost hours because their employers had been closed or had lost business. Nine million, or 6.1%, of the 149.6 million who say they are working under the household survey have experienced some kind of material interruption.

Again, these are employed persons.

Of those, 83%, or about 7.5 million, did not receive any pay from their employers for the lost time. These who were all employed, they had jobs, but suddenly it was no longer a steady one.

We have to be drawn to the permanent income hypothesis here, too.

For all the past talk about a “V” recovery, in its place is only more evidence that the rebound which had been gigantic at one point still never got close enough to flirting with gigantic enough. The two labor pools we spoke of back then have shifted balance; the initial reopening flood of workers let back in has seemingly exhausted itself, or nearing to that point. What’s left is, pardon the tautology, maybe close to all that’s left.

One further direct consequence has been a renewed amplification in the post-2008 participation problem. The Labor Force, which shrunk hugely in March and April, hasn’t come back since this unusually large proportion of American workers understands there’s not much point. They report to the BLS instead that they are neither working nor looking to work (and haven’t for at least four weeks).

The overall labor force, therefore, was the same general size in December that it had been all the way back around June. Not only are 3.8 million potential workers still “missing” from it, there’s also the 1.6 million new potential workers (population increase) who have no chance; and so remain outside the labor force (or bump someone already in out), as well.

So far as social implications go, and politics to a more extreme degree, these are chilling numbers; or they should be considered as such. Widespread sanguinity prevails. Is it because we don’t see repeated images of the disturbingly long food bank distribution lines anywhere on TV or splashed incessantly across social media? Is there really widespread belief that a government check drawn from the TGA will just make this all disappear (if given enough time)?

The BLS, however, has now filled in the entire labor market calendar for 2020. It wasn’t supposed to have ended in this fashion; certainly not when and of the original “V” days.

In terms of risk markets, in particular stocks, and to an extent the bond market, much of this is being discounted under the cover of expectations for a near-perfect vaccination rollout combined with the potential for more “helicopter” bribes to just hold everything together until…some underdetermined point when it all just goes back to normal. Kind of hopes for a delayed “V” being laid down in the original’s place.

Lastly, and I think it bears repeating, this isn’t really about markets and investments. This is about people, and not just Americans. These kinds of deficits and disruptions are global in nature. It’s the sort of thing we haven’t witnessed in decades, generations. And it’s not going away.

Vaccines and government aid are hopeful and helpful, but their aim is only what there is; they don’t – and can’t – address what there no longer is, what economic capacities have been snuffed out and permanently lost certainly will be sharply missed for a long time.

The double “L” grows because the underlying economy can’t under this burden. At the end of 2020, it sure seems like rebound alone is all we’ve got. What’s left of it.