January 07, 2022
The 3.9 percent December unemployment rate is better than all but five months in the 1990s boom.
The unemployment rate fell another 0.3 percentage points in December, bringing the unemployment rate down to 3.9 percent. This is lower than all but five months in the late 1990s boom and the period between May 2018 and the pandemic.
At the same time, the establishment survey showed a weaker than expected increase in 199,000 jobs; although the prior two months figures were revised upward by a total of 141,000. With the upward revisions, the average growth for the last three months was 365,000.
Overall employment is now down by 3.6 million, or 2.3 percent, from its pre-pandemic level. Private sector employment is down by 2.6 million, which is 2.0 percent below the pre-pandemic level.
It is important to note that omicron was not a factor in this report, since the strain first began to have significant spread after the reference week.
Wage Growth Remains Strong
There is little evidence that wage growth is slowing in this report. The annualized rate of growth in the average hourly wage for the last three months (October-December) compared with the prior three months (July-September) is 6.1 percent. That is up from 4.7 percent over the last year. The growth continues to be fastest at the bottom. The annualized rate of growth in the hourly wage for production and nonsupervisory workers is 6.9 percent, compared to 5.8 percent year-over-year. The annualized growth rate for workers in hotels was 9.6 percent, but this is down from a 15.8 percent year-over-year rise.
Manufacturing and Construction Continue to Have Strong Gains
Manufacturing added 26,000 jobs in December, while construction added 22,000. Manufacturing employment now stands 219,000 (1.7 percent) below its pre-pandemic level, while construction employment is 88,000 (1.2 percent) lower.
Low-Paying Sectors Still Struggle to Find Workers
Nursing and residential care facilities lost 6,100 jobs in December, while childcare lost 3,700 jobs. Employment in these sectors is now down by 12.4 percent and 10.6 percent, respectively from pre-pandemic levels.
Difficulty attracting workers is also a big factor in much of the leisure and hospitality sector. Hotels added 10,000 jobs in December, while restaurants added 42,600; but employment in both sectors is still far below pre-pandemic levels. Employment in restaurants is still 653,000, or 5.3 percent from pre-pandemic levels. Hotel employment is down 304,000, or 14.4 percent, from pre-pandemic levels. However, the length of the average workweek has increased by 1.9 percent in the sector, the equivalent of more than 250,000 jobs with an unchanged workweek.
Other Pandemic Affected Sectors Continue to Struggle
The movie industry, which has taken the biggest hit in the pandemic, lost 6,200 jobs in December, putting employment 22.9 percent below its pre-pandemic level. The arts and entertainment sector added back just 700 jobs, leaving it 265,000 jobs, or 10.6 percent below its pre-pandemic level.
State and Local Government Employment Continues to Fall
Jobs in state and local governments fell by another 10,000; although employment in education did rise by 3,200 in December. Employment in the state and local government sectors has been dropping since July. It now stands at 944,000, or 4.7 percent below its pre-pandemic level. The problem here is that these governments can not easily raise wages or offer hiring bonuses to compete with the private sector.
Unemployment Rates Fall for Most Groups
The picture in the household survey was overwhelmingly positive, with many disadvantaged groups seeing large improvements. The unemployment rate for workers with just a high school degree fell by 0.6 percentage points to 4.6 percent, 1.2 percentage points above its pre-pandemic low. The drop for workers without a high school degree was 0.3 percentage points to 5.2 percent, which is 0.3 percentage points above its pre-pandemic low. The unemployment rate for Hispanics fell by 0.3 percentage points to 4.9 percent, 0.9 percentage points above its pre-pandemic low.
Black Teen Unemployment Up from Summer Lows
The Black teen unemployment rate hit a record low of 9.9 percent in June and has risen in recent months. It was 21.0 percent in December, the second consecutive month it has been over 20 percent.
U-6 Measure of Labor Market Slack Falls
The Bureau of Labor Statistics U-6 measure of labor market slack (which adds in people working part-time who would like full-time unemployment, and workers who report wanting a job, but are not actively looking for work) fell 0.4 percentage points to 7.3 percent, a level not reached following the Great Recession until February 2019.
Self-Employment Remains High
The number of the unincorporated self-employed is 528,000 above the average for 2019. Earlier in the pandemic this rise may have been attributable to people being unable to find other work, but this is no longer plausibly the case.
Another Overwhelmingly Positive Report
The job growth reported for December was lower than expected, but given recent patterns, it is likely that it will be revised up in the later reports. In many sectors the reason we are not seeing more jobs is largely due to the supply side, with workers unwilling to work at jobs with low pay and bad conditions. However, the prime age (ages 25 to 54) employment-to-population ratio is still 1.5 percentage points below its pre-recession peak, so there is still some way to go before we have gotten back all the ground lost in the pandemic.
Wage growth continues to be very fast. This will be inflationary if there is not some slowing in future months.
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