Hiring slowed again last month as employers continued to struggle to find workers in an economy now facing the full impact of the omicron variant.
US employers added just 199,000 workers to their payroll in December, according to Labor Department data on Friday. This was well below expectations of around 400,000 jobs created, marking a second consecutive month of disappointing job growth.
However, there were also positive signs. The unemployment rate fell to 3.9% in December from 4.2% the previous month. Meanwhile, job gains for October and November have been revised up to 141,000 in total.
The monthly snapshot reflects conditions from approximately three weeks ago. Since then, there has been a spike in new coronavirus infections linked to the omicron variant, which could further weigh on job gains in the coming weeks.
“We see this as a small window between when the delta variant fades away and before the omicron variant accelerates and spreads rapidly,” said Nela Richardson, chief economist at payroll company ADP. .
Bars and restaurants created 43,000 jobs in December, while construction crews added 22,000.
Factories have also been eager to hire, despite the constant challenges in securing parts and raw materials. The manufacturing sector added 26,000 jobs in December.
A survey of plant managers released this week suggests supply chain headaches may ease a bit, although a new wave of pandemic disease may reverse those gains.
“With omicron, it’s a slowdown, and we’re going to have to fight for the next two months,” said Tim Fiore, who compiles the survey for the Institute for Supply Management.
‘The big job’
So far, there have been few signs that the omicron push has reduced the number of “help wanted” signs increasing in the economy.
Employers started December with a near-record number of job postings – 10.6 million – and posts on the job search website Indeed, for example, were flat until the end. of the month.
“The demand for workers, at least from the data in our platform, has not declined significantly due to the recent increase in the number of cases,” said Research Director Nick Bunker of the Indeed Hiring Lab . “That could change pretty quickly, so that’s something we’re going to be keeping an eye on.”
Companies have struggled to find enough workers to meet demand, with restaurants, bars and hotels recording some of the highest turnover. A record 4.5 million people left their jobs in November.
Many of those who have quit in recent months are not leaving the job market entirely, but taking better jobs elsewhere. As a result, Bunker said it was a mistake to describe the churn as “the big resignation.” He prefers to call it “the good job”.
With more vacancies than workers available, employees have benefited from new bargaining power to demand higher wages and better working conditions.
Bunker noted, however, that growing concern over the omicron variant could keep some potential workers on the sidelines, at least temporarily.
“One of the sources of hesitation among job seekers has been lingering fears about the pandemic,” Bunker said. “So it’s possible that right now, maybe for a few more weeks, workers are reluctant to return to work.”
The number of people working or looking for work rose by 168,000 in December, following a sharp rise the month before. There are still 2.1 million fewer people in the workforce today than in February 2020, before the pandemic took hold in the United States
The monthly report of the Ministry of Labor is based on two surveys, one among businesses and the other among households. The household survey suggested stronger job gains in December, for the second consecutive month.
Tight labor market could make inflation worse
The Federal Reserve is watching the job market closely for any signs that rising wages will raise inflation, which is already as high as it has been for almost four decades.
Minutes from the last Fed meeting showed policymakers worried that labor shortages might persist longer than expected, putting upward pressure on prices.
“Many business contacts continued to experience difficulty in hiring workers at all skill levels,” the minutes said. “Some participants noted that companies offered higher wages, higher bonuses or more flexible working arrangements to compete with workers.”
Any sign of higher wages fueling inflation would be of concern to the Fed, as it could produce the kind of wage price spiral that contributed to soaring inflation in the 1970s.
This could force the Fed to raise interest rates more aggressively. A majority of Fed policymakers have already said they expect rate hikes of at least three-quarters of a percentage point this year.
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