February 04, 2022
Employers responded to omicron by cutting hours rather than workers.
The economy added 467,000 jobs in January, in spite of the spread of the omicron variant. Even pandemic sensitive sectors such as hotels and restaurants were big job gainers. It appears that employers’ main response was to reduce hours, with the average workweek falling by 0.2 hours, a decline of 0.6 percent. The unemployment rate was little changed at 4.0 percent.
Revisions Change Our View of the Economy
The annual benchmark revisions, which include different seasonal adjustment factors, give a radically different view of the economy in 2021. With the revisions, job growth in November and December was revised up by 709,000 to show a two-month gain of 1,157,000. By contrast, job growth in June and July was revised down by 807,000, so that these months now show a total gain of 1,246,000.
The new data indicate that job growth was far stronger at the end of 2021 than previously thought, while somewhat less rapid for the summer months. For the year, the revisions added 217,000 jobs, putting the 2021 total gain at 6,665,000 jobs. Job loss in 2020 now stands at 9,292,000. We’re now 2.9 million jobs below the pre-pandemic level.
Wage Growth is Still Very Rapid
There is little evidence in this report that wage growth is slowing. Comparing the last three months (November-January) with the prior three (August-October), overall private sector wages rose at a 6.5 percent annual rate, up somewhat from the 5.7 percent rate over the last year. Wages in retail grew at a 5.8 percent annual rate, up from a 5.4 percent rate over the last year. Wage growth in restaurants did slow somewhat, rising at a 10.6 percent rate, compared to a 13.0 percent rate over the last year.
The reduction in hours could be skewing the wage data up modestly in January. The decline in hours is equivalent to a decline in private sector employment of more than 700,000. If most of the hours lost were among lower paid workers, then it would raise the average pay for the month.
Employment and Unemployment Rates Little Changed
The employment-to-population ratio (EPOP) rose 0.3 percentage point, but all of that was due to the annual change in population controls. Without these changes, it would have edged down by 0.1 percentage point. The unemployment rate was unaffected by the controls, rising 0.1 percentage point. The prime-age (25 to 54) EPOP edged up to 79.1 percent, a level not reached following the Great Recession until February 2018.
Black Unemployment Falls 0.2 Percentage Point to 6.9 Percent
The Black unemployment is still 1.5 percentage points above its pre-pandemic low. By contrast, the white unemployment is just 0.4 percentage point above the low reached before the pandemic.
The unemployment rate for Asian Americans fell slightly to 3.6 percent. It is still 0.2 percentage point above the unemployment rate for whites. Before the pandemic, the unemployment rate for Asian Americans was typically somewhat below the unemployment rate for whites. The unemployment rate for Hispanics was unchanged at 4.9 percent, 0.9 percentage point above its pre-pandemic low.
Other Data in Household Survey is Looking More Normal
There was a sharp drop in the share of long-term (more than 26 weeks) unemployed to 25.9 percent. This is still high but much closer to pre-pandemic levels. The share of unemployment due to voluntary quits jumped to 14.5 percent, which is more in line with the low unemployment number. The number of involuntary part-time workers fell sharply, hitting its lowest share of employment since 2000. The U6 measure of labor market slack fell to 7.1 percent, just 0.3 percentage point above its all-time low.
Manufacturing and Construction Had Mixed Performance in January
Manufacturing added 13,000 jobs in January, its ninth consecutive monthly gain. Employment in the sector is now down 1.8 percent from pre-pandemic levels. Construction lost 5,000, which was possibly weather related. Employment is down 1.3 percent from pre-pandemic levels.
Many Pandemic Affected Sectors Did Well in January
Airline employment rose 6,800 in the month and is now more than 1.0 percent above its pre-pandemic level. Restaurants added 108,200 jobs, hotels added 22,600 jobs, while arts and entertainment added 20,100 jobs. Employment in these sectors is now down 8.0 percent, 22.3 percent, and 11.7 percent, respectively from pre-pandemic levels. These sectors account for the overwhelming majority of the jobs shortfall from pre-pandemic levels.
Retail added 61,000 workers in January. This gain, coupled with upward revisions, pushed employment in the sector above its pre-pandemic level.
Nursing Homes and Childcare Add Workers
Jobs in nursing homes increased by 2,100 in January in only the second rise since the pandemic began. Employment is down by 15.0 percent from before the pandemic. Employment in childcare was up 5,600, but it is still down 12.4 percent from its pre-pandemic level.
State and Local Education Add Workers, Still Far Below Pre-Pandemic Levels
State and local education added 28,400 jobs in January, but employment is still down 3.6 percent from its pre-pandemic level. This likely reflects difficulty competing with private sector wages, but it may also be partially due to political attacks on teachers in recent months.
Another Strong Report
Contrary to most expectations, it doesn’t seem that the omicron variant dampened job growth in January. In many respects the labor market is looking much closer to normal; although public sector employment and employment in the leisure and hospitality sectors are still far below pre-pandemic levels.
Wages continue to grow at a rapid pace. There is some evidence of slowing in sectors showing the most rapid growth, but wage growth in excess of 6.0 percent cannot be sustained without serious problems with inflation.
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