WASHINGTON (AP) — The nation’s unemployment rate fell in December to a healthy 3.9% — a pandemic low — even as employers added a modest 199,000 jobs, proof they are struggling to fill jobs with many Americans reluctant to return to the workforce.
The drop in the unemployment rate, from 4.2% in November, indicates that many more people found work last month. In fact, despite the slight gain in hiring reported by businesses, 651,000 more workers said they were employed in December compared to November.
Yet data released Friday by the Labor Department reflected the state of the labor market in early December – before the spike in COVID-19 infections began to disrupt the economy. Economists have warned that job growth could slow in January and possibly February due to the omicron cases, which forced millions of newly infected workers to stay home and quarantine. The economy still lacks about 3.6 million jobs at its pre-pandemic level.
For now, steady hiring is being driven by strong consumer demand which has remained resilient despite chronic supply shortages. Consumer spending and business equipment purchases will likely propel the economy to a robust annual growth rate of around 7% in the last three months of 2021. Americans’ confidence in the economy rose slightly in December, according to the Conference Board, suggesting that spending was likely healthy for much of last month.
Wages also rose sharply in December, with average hourly earnings jumping 4.7% from a year ago. This salary increase is a sign that companies are competing fiercely to fill their vacancies. A record wave of abandonments, as many workers seek better jobs, is helping to fuel higher wages.
However, low unemployment and rapid wage gains could further worsen inflation as companies raise prices to cover rising labor costs. Price increases have already reached their highest level in four decades, prompting a sharp pivot by the Federal Reserve, from keeping rates low to support hiring to raising interest rates to fight inflation. Most economists expect the Fed to raise its short-term policy rate from now close to zero in March and do so two or three more times this year.
“Companies are paying for workers,” said Neil Dutta, economist at Renaissance Macro Research. “That’s consistent with inflation well above 2%, which keeps the pressure on the Fed to raise interest rates.”
Among those benefiting from the intense competition for workers is Patrick Freeman, a janitor at a furniture factory in Hickory, North Carolina. In late November, Freeman, 57, got a permanent job after spending two years as a temp. Freeman received the good news at a time when many of his colleagues found other jobs elsewhere, leaving the company short-staffed.
“They dispersed,” he said, referring to his colleagues. “They are really short in a lot of areas. I stay around.
Coming on board permanently, Freeman got a pay raise of $12 to $16 an hour. After a 60-day probationary period, he will also receive health, dental and vision benefits. And he is eligible for the company’s employee share ownership program.
Becky Frankiewicz, president of recruitment giant ManpowerGroup North America, said many Manpower clients are upgrading their employees from temporary to permanent status because workers are scarce, so they want to “lock people in.”
Frankiewicz said Manpower has calculated that due to the omicron, absenteeism is three times its peak in 2021. Yet there has been “no slowdown in demand” for workers, she said. declared.
Broader in the economy, however, job growth will likely be hit hard this month by the omicron variant, which has sickened millions of Americans, forcing airlines to cancel thousands of flights., reduced traffic in restaurants and bars and caused the closure of some major school systems, potentially keeping some parents at home with children and unable to work.
This could make it even more difficult for businesses to stay at full capacity and could also slow the economy. Michael Pearce, economist at Capital Economics, notes that millions of workers will likely be quarantined at home next week. For those who aren’t paid — about a fifth of the US workforce doesn’t have sick leave — their jobs won’t be counted by the government. This would reduce the job gain reported by businesses in January.
Omicron has forced so many workers to call in sick, it’s 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 calling in sick.
The wave of infections is also likely to weigh on restaurant and bar jobs. The number of Americans ready to eat out began to drop in late December, according to reservations 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 COVID-19 variants and few states or localities have decided to limit business operations, economists say they think its economic impact will be short-lived.
Omicron may have had some impact on the December data, with the 199,000 additional jobs coming in well below what economists had 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 December’s modest gain, 2021 was one of the best years for American workers in decades, although it followed 2020, the labor market’s worst year since records began in 1939, a consequence 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 reflects a rebound from the steep losses of 2020, when the country lost 6.2% of its jobs.
Many companies are looking past the omicron wave and continuing to hire. Angie Podolak, director of human capital at Beneficial State Bank based in Oakland, Calif., said the company, which employs about 195 people, is seeing strong growth in auto loans and is looking to fill 12 jobs.
Although some of its front-line employees called in sick, Podolak said the bank did not have 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 knock on wood and have my fingers crossed right now. But we have not seen a significant impact on our recruitment.
The aftermath of the pandemic has made the government’s survey of business payrolls more volatile, with one month’s data often followed by a very different trend a month or two later. On Friday, for example, November’s job gain of 210,000 was revised to 249,000, and October’s gain, originally reported at 531,000, was increased 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, this survey found that 651,000 more people said they were employed. A separate survey of employers, called the payroll survey, reported only 199,000 more jobs.
Although the results of the two surveys generally correspond over the long term, they can differ significantly over the course of a month.