WASHINGTON (AP) – One of the fastest growing years in United States history stumbled over the finish line in December.
Hampered by worker shortages and persistent threats from the coronavirus, U.S. employers added just 199,000 jobs last month – the lowest monthly volume since December 2020 and only about half of the total economists had envisioned.
The news was hardly gloomy. The unemployment rate has fallen to a pandemic low of 3.9%. Salaries have gone up. More people reported having a job in December compared to November. And the government has revised upward its estimate of job growth in October and November to a total of 141,000.
The pandemic has taken the job market on a wild ride. As COVID-19 hit the United States in March 2020, governments ordered shutdowns and families curled up in their homes as a health precaution. Shops closed or reduced hours. Employers laid off tens of millions of workers.
But sweeping injections of government stimulus – and ultimately the rollout of vaccines – have rebooted the economy at unexpected speed. Employers created 6.4 million jobs last year, the highest number recorded by the Labor Ministry in eight decades. In percentage terms, hires increased 4.5% last year, the highest since 1978.
“The pace of the overall recovery in the labor market has been remarkable,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Yet the economy has yet to recover from the catastrophic loss of 9.4 million jobs – also a record – in 2020. About 3.6 million jobs remain below their previous level. the pandemic.
And hiring slowed down sharply this fall. December’s disappointing job gain was calculated ahead of an increase in COVID cases linked to the omicron variant, suggesting things could at least temporarily worsen from this month.
Here are five takeaways from the December jobs report:
ASK FOR HELP
One of the main reasons hiring has slowed down is simply that companies still can’t find as many workers as they need. In November, employers posted 10.6 million job vacancies, the sixth consecutive month above 10 million – a level not seen until this year in data going back to 2000. For every American unemployed , there are now 1.4 jobs.
With their services in high demand, many workers are taking advantage of a tight labor market to seek or accept better offers: a record 4.5 million people left their jobs in November.
“In almost every way, this is a job market that favors workers and challenges employers,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “The slowdown in job creation does not reflect weak demand but the increasing difficulty in filling these positions. Tense labor market conditions are expected to persist until 2022. ”
An increase in early retirement since the start of the pandemic and a drop in immigration have contributed to the decrease in the supply of workers. In addition, some Americans are reluctant to return to work in the event of an unpredictable health crisis. And others are struggling to find daycare at a time when its cost and availability have become problematic and school hours have been disrupted by COVID.
GOOD NEWS ON UNEMPLOYMENT
Falling unemployment is not always good news. Sometimes the unemployment rate can go down for the wrong reason – because unemployed people are so discouraged that they stop looking for a job. Once people stop looking for work, the government no longer classifies them as unemployed.
But the drop in the unemployment rate last month – to 3.9%, a pandemic low, from 4.2% in November – was encouraging. The labor force, made up of people with or looking for work, increased by 168,000 in December. The number of people reporting to have a job increased by 651,000. And the ranks of the unemployed fell by 483,000.
“The evidence is overwhelming that the job market is extremely tight,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The unemployment rate slipping below 4% well ahead of schedule is the most publicized signal.”
A TALE OF TWO INVESTIGATIONS
Why did the jobs report send such mixed signals – lukewarm jobs gain but plummeting unemployment?
The explanation lies in the fact that the Department of Labor compiles the monthly employment report from two separate surveys. A survey determines the number of jobs added by employers, based on their payroll. The other survey is carried out among households and is used to calculate the unemployment rate. The two surveys sometimes tell different stories in any given month, although the gaps usually narrow over time.
For the payroll survey, the government mainly asks large businesses and government agencies how many people they employed that month.
But to determine unemployment, it asks households whether the adults who live there work. Those who are not working but are looking for a job are considered unemployed.
Unlike the payroll survey, the household survey counts farm workers, the self-employed and people working for new businesses. It also does a better job of capturing small business jobs.
But the household survey is less precise. The Department of Labor only surveys 60,000 households. That’s far less than the 145,000 private and government employers he polled for the payroll report.
The labor shortage is forcing companies to pay more, which contributes to a surge in inflation. Hourly wages have increased 4.7% in the past year. In the leisure and hospitality industry, including restaurants and hotels, hourly wages jumped 14.1% from December 2020.
To compensate for the higher cost of labor and materials, companies are raising prices. Consumer prices jumped 6.8% in November from a year earlier, the largest increase in nearly four decades.
“It is hardly surprising that employers have to pay, given the shortage of skilled labor,” wrote Joshua Shapiro, chief US economist at consultancy Maria Fiorini Ramirez Inc., in a comment.
The increase in wages, he added, “threatens to stimulate inflation in the service sector, where labor is an essential part of the cost structure.”
New hires at service-sector companies, which account for 84% of private-sector jobs in the United States, fell to 157,000 last month, the lowest number since January 2021. Retailers have in fact cut 2 100 jobs in December after cutting 13,300 in November. Leisure and hospitality, which created an average of 228,000 jobs per month from January to November last year, added only 53,000 in December.
Health and education companies created 10,000 jobs last month, the fewest since January 2021.
Sluggish job growth in these industries “underscores the acute labor shortages they face as workers face increasing pressure and health risks from the persistent pandemic.” , wrote economists Lydia Boussour and Gregory Daco of Oxford Economics.
They also noted that childcare providers have lost their jobs for three consecutive months, “a sign that it will take some time for interruptions in child care to dissipate completely.”