Job Growth in the South Bucks Losses in Rest of U.S.

In contrast, payrolls in the Midwest, West and Northeast fell last month, when the nation’s total payrolls slipped by 140,000 for the first decline in seven months.

In those parts of the country, a surge in virus infections, related restrictions and winter weather prompted steep job cuts in leisure and hospitality industries, which includes restaurants. In the South, those jobs held nearly steady.

The South’s milder winter weather makes it easier to dine outside or participate in other outdoors activities, said Mark Vitner, a Charlotte, N.C.-based economist at Wells Fargo Securities. More lenient public health regulations that have kept businesses open have also had an impact.

“It’s a greater willingness on the part of government to work with businesses,” Mr. Vitner said. He said stricter business limits in places such as California and New York, aimed at containing the spread of the virus, have curbed job growth.

December seasonally adjusted payrolls increased in 15 states—with significant increases in six states in the South, five in the Midwest and four in the West, the Labor Department said. Payrolls fell in 11 states and were mostly unchanged in 24.

The nation’s payrolls overall remain below levels from before the pandemic. Through December, about 12 million jobs have been recovered from the 22 million lost in March and April of last year. December job totals in the South were 4.1% below a pre-pandemic peak, measured from February of last year, while the Midwest was 6.5% lower, the West 6.7 % lower and the Northeast 9.2% lower.

The South—as defined by U.S. census regions as 16 states from Texas to Delaware—also saw a decline in its unemployment rate to 6.1% in December from 6.4% the prior month. That is below the national rate of 6.7% and slightly above the Midwest. The unemployment rate was higher than the rate in the Northeast and West.

The continued jobs rebound is a sign of longer-term growth for the South, Mr. Vitner said. He pointed to the heightened appeal of lower-cost regions during an economic downturn and the resurgence of domestic manufacturing as signs that the South could emerge from the downturn with a stronger economy than other regions.

“I don’t think this is a short-term Covid experience. What happens in recessions, particularly deep recessions, is that trends that were evident and that were emerging prior to the recession tend to be accelerated,” he said.

Across the country, job losses have been steepest in the leisure and hospitality sector, which is part of the broader services category. Many restaurants, theaters, bars and bowling alleys have either closed down completely or are operating at a fraction of pre-pandemic levels as safety restrictions curb capacity and would-be customers stay home.

But manufacturers, driven by renewed consumers’ demand for goods, have created jobs across the country. All four regions saw an uptick in goods-producing payrolls in December from the prior month, the Labor Department said. Manufacturing jobs have recovered the most in the South, with the West and Midwest not far behind.

Janis Petrini, owner and operator of Express Employment Professionals staffing office in Grand Rapids, Mich., said demand for workers in her area currently exceeds pre-pandemic levels, driven by job openings at local manufacturing companies. She said manufacturers have revved up production of essential goods such as food, packaging and medical supplies.

“Covid created a lot of new opportunities and a lot of new demands on these existing businesses that were just not there before because of the intensity of what happened,” she said.

Grand Rapids, meanwhile, has seen numerous closures and job losses across the hospitality sector, Ms. Petrini said. But these workers often have the skills to move into manufacturing and distribution positions, many with higher wages.

“We’re starting to see people come back into the workforce that have been off since March.” she said.

The recovery of lost jobs has lagged behind in the Northeast. There the  unemployment rate remained higher, hovering above the nationwide level. New York, Connecticut and Rhode Island all logged unemployment rates over 8% last month, with New Jersey and Massachusetts not far behind.

—Danny Dougherty contributed to this article.