Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Here are the key points from the December employment report:
199,000 jobs were added last month, less than half of what was expected.
The unemployment rate fell from 4.2% to 3.9%.
Wages are up 4.7% over the past year.
October and November’s job gains were revised up by a total of 141,000.
Over 6.4 million jobs were added in 2021, a new record.
Since April 2020, employment has risen by 18.8 million and is just 2.3% shy of its pre-pandemic level.
Although some are a bit disappointing, these are all positive things. You may be wondering how the unemployment rate fell that much with very little job growth in December. That’s because the unemployment rate comes from the household survey, while the job gain is derived from a survey of businesses. Sometimes these surveys get out of sync. And remember: To be considered unemployed, you must be actively looking for work.
And there lies the big problem with the labor market. According to the latest JOLTS report, there are currently 10.6 million available jobs in the U.S., so why were only 199,000 filled last month? You may be thinking the rise of the Omicron variant had something to do with it, but this data was collected the week of December 12, before Omicron started to cause a huge spike in COVID cases.
The inability of businesses to find workers continues to limit job growth and hold back economic growth. It’s great that wages are rising at a 4.7% annual rate, but with inflation running at a 6.9% pace, Americans’ purchasing power is falling.
Two things to watch for in the coming weeks are how the Omicron variant impacts hiring and consumer spending, and if the Fed speeds up its plan to raise rates. A 3.9% unemployment rate combined with a 6.9% spike in inflation should remind the Fed how far behind the curve it really is.
Lawrence N. Brooks, 1909-2022
You may remember last September I wrote about the oldest living World War II veteran, Lawrence N. Brooks. He had just turned 112 and said his secret to a long life was "serving God and being nice to people." I’m sorry to report that private first-class Brooks passed away this week. My thoughts and prayers are with his family, and I will always be thankful for his service and for all who have defended this great country. Have a great weekend, and enjoy playing in the snow. Subscribe here to receive The Line in your inbox.