December’s jobs report was again below expectations, with just 199,000 nonfarm jobs added last month. Also disappointing was the fact that wages are rising slower than inflation.
The unemployment rate fell 0.3 percentage points to 3.9%, and the labor force participation rate was unchanged at 61.9%.
The number of unemployed fell 483,000 to 6.3 million. There are now 602,000 more unemployed people than in February 2020, the last month before the pandemic-related closures.
The private sector added 211,000 jobs, with the service sector continuing to be the primary driver of job growth.
Leisure and hospitality was the strongest performing sector, adding 53,000 jobs, more than 80% of which were in food services and drinking places. This is positive news for bars and restaurants, though the industry as a whole is still well below pre-pandemic levels.
Professional and business services continued to be one of the best performing sectors in the labor market, gaining 43,000 jobs in December.
Manufacturing and construction added 26,000 and 22,000 jobs respectively. While these sectors grew last month, they did so at a slower pace than in previous months.
Transportation and warehousing grew by 18,700 jobs. This sector has experienced many supply chain issues that have hampered other industries, so growth here will likely have a positive impact in delivering products and other services to consumers.
Despite energy prices being at multi-year highs, employment in oil and gas extraction only increased 2,300 in December.
The retail sector saw an unexpected decline of 2,100 jobs.
Health care also saw a decline in employment, falling 3,100 jobs.
Government saw the largest decline of any sector, losing 12,000 jobs.
Earnings, Revisions, Miscellaneous
Average hourly earnings rose 19 cents to $31.31, a 0.6% monthly increase. December was the ninth consecutive month of nominal earnings increases. Over that same time, however, inflation has risen faster.
October nonfarm payroll was revised up 102,000 to 546,000 and November was revised up 39,000 to 249,000. Even with these positive revisions, the December jobs number is still below expectations.
Prime age (25-54 years old) employment grew by 344,000 and is now 190,000 (0.2%) below its February 2020 level.
Adding just 168,000 people in December, the labor force is still 2.3 million below February 2020.
The employment-population ratio increased to 59.5%, which is 1.7 percentage points below February 2020.
December’s jobs report was disappointing overall. The household survey (used to compute the unemployment rate) showed 651,000 jobs added but the establishment survey (used to compute the headline jobs number) badly missed expectations again with just 199,000 jobs added. (See the November 2021 job report for more on the different survey methodologies.) The major labor market measurements of employment, labor force participation, and real earnings have been below expectations. The nation is still 3.6 million jobs below its February 2020 level and real earnings have declined 2.0% over the last year. While the headline unemployment rate (called U-3) is down to 3.9%, the more comprehensive U-6 unemployment rate is still at 7.3%. The latter includes more people, such as those who are only employed part time but would like full time work.
With college degree unemployment now down to just 2.1%, there is no reason for the Biden administration’s student loan moratorium to be extended again; the program should be retired.
The Federal Reserve should act immediately to rein in inflation.
Vaccine mandates continue to create uncertainty for employers and employees and should be abandoned immediately.