The drop in the unemployment rate to 4.2% in November indicated that many more people found work in the past month. In fact, despite the slight gain in hiring reported by businesses, 651,000 more workers reported having a job in December compared to November.
Yet data reported by the Labor Ministry on Friday reflected the state of the labor market in early December – before the surge in COVID-19 infections began to disrupt the economy. Economists have warned that job growth could slow in January and possibly February due to cases of omicron, which have forced millions of newly infected workers to stay home and self-quarantine. The economy still has around 3.6 million jobs below its pre-pandemic level.
For now, the regularity of hiring is driven by strong consumer demand which has remained resilient despite chronic supply shortages. Consumer spending and business equipment purchases are likely to propel the economy to a robust annual growth rate of around 7% over the last three months of 2021. American confidence in the economy edged up in December, according to the Conference Board, suggesting that spending was likely healthy for much of last month.
Wages also rose sharply in December, as the average hourly wage jumped 4.7% from a year ago. This pay rise is a sign that companies are competing fiercely to fill their vacancies. A record wave of quits, as many workers search for better jobs, is helping fuel wage increases.
Low unemployment and rapid wage gains, however, could fuel inflation, as companies raise prices to cover rising labor costs. Price hikes have already peaked in four decades, causing the Federal Reserve to turn sharply from keeping rates low to support hiring to raising interest rates to fight inflation. Most economists expect the Fed to raise its short-term benchmark rate, now close to zero, in March and do so two or three more times this year.
“Businesses pay for workers,” said Neil Dutta, economist at Renaissance Macro Research. “This is consistent with inflation well above 2%, which keeps the pressure on the Fed to raise interest rates.”
Among those who benefit from the intense competition for workers is Patrick Freeman, a custodian at a furniture factory in Hickory, North Carolina. At the end of November Freeman, 57, got a permanent job after working as a temp for two years. Freeman received the good news as many of his colleagues found other jobs elsewhere, leaving the company understaffed.
“They dispersed,” he said, referring to his co-workers. “They’re really short in a lot of ways. I’m sticking around.”
Came on board permanently, Freeman took advantage of a pay rise from $ 12 to $ 16 an hour. After a 60-day probationary period, he will also receive health, dental and visual benefits. And he is eligible for the company’s employee shareholding program.
Becky Frankiewicz, president of personnel giant ManpowerGroup North America, said many Manpower clients are moving employees from temporary to permanent status because workers are scarce they want to “lock people up.”
Frankiewicz said Manpower has calculated that due to omicron absenteeism is three times higher than in 2021. Yet there has been “no slowdown in demand” for workers, he said. she declared.
More broadly across the economy, however, job growth will likely be hit hard this month by the omicron variant, which has sickened millions of Americans, forced airlines to cancel thousands of flights, reduced traffic to restaurants and bars, and caused large school systems to shut down, potentially keeping some parents at home with their children and unable to work.
This could make it even more difficult for businesses to maintain a full workforce and could also slow the economy. Michael Pearce, an economist at Capital Economics, notes that millions of workers will likely be quarantined at home next week. For those who don’t get paid – about a fifth of the American workforce does not have sick leave – their jobs will not be counted by the government. This would reduce the employment gain reported by businesses for January.
Omicron has forced so many workers to make themselves sick that it is disrupting businesses ranging from ski resorts to airlines to hospitals. Alaska Airlines said it was cutting 10% of its flights in January due to an “unprecedented” number of employees falling ill.
The wave of infections is also likely weighing on restaurant and bar jobs. The number of Americans ready to eat at restaurants began to decline in late December, according to the reservation site OpenTable. Restaurant traffic was near pre-pandemic levels for much of November, but had fallen nearly 25% below those levels as of December 30, based on a weekly average of data. from OpenTable.
But because omicron is less virulent than previous variants of COVID-19 and few states or localities have decided to limit business operations, economists say they believe its economic impact will be short-lived.
Omicron may have had an impact on the December data, with the added 199,000 jobs well below what economists expected. A category that includes restaurants, bars, hotels and casinos only gained 53,000 positions, compared to several hundred thousand per month that were added earlier this year.
Even with the modest gain in December, 2021 was one of the best years for working Americans in decades, although it followed 2020, the worst year in the labor market since the record began in 1939 as a result of the pandemic recession. Companies posted a record number of open jobs last year and offered significantly higher wages to try to find and keep workers.
The number of jobs rose 4.5% in 2021, the largest gain since 1978. This partly reflected a rebound from the steep losses of 2020, when the country cut 6.2% of its jobs.
Many companies are looking beyond the omicron wave and continue to add workers. Angie Podolak, director of human capital at Oakland, Calif., Based Beneficial State Bank, said the company, which employs around 195 people, is experiencing strong growth in auto loans and is looking to fill 12 jobs.
Although some of its frontline workers have reported illness, Podolak said the bank has not had to cut hours or lose business because of omicron. She also didn’t have to slow down her recruiting efforts. Beneficial already conducts job interviews by video.
“It’s really business as usual for us,” Podolak said. “I’m touching wood and crossing my fingers right now. But we didn’t see a significant impact on our recruiting.
The aftermath of the pandemic has made the government’s survey of corporate payrolls more volatile, with a month’s data often followed by a very different trend a month or two later. On Friday, for example, the November employment gain of 210,000 was revised to 249,000, and October’s gain, initially reported at 531,000, was raised to 648,000.
The December report also reflects a discrepancy between two surveys the government conducts each month. The unemployment rate is calculated from a household survey. For the past month, that survey found that an additional 651,000 people said they were employed. A separate survey of employers, called the Payroll Survey, reported only 199,000 additional jobs.
Although the results of the two surveys are generally consistent over the long term, they can differ significantly over the course of a month.