The jobs report appears disappointing on the surface—but we’ll get a more complete picture in the coming weeks

January 7, 2022, 3:36 PM UTC

U.S. employers continued to hire workers last month, but at lower-than-expected levels even as the national unemployment rate ticked down in December. 

Last month, employers hired 199,000 nonfarm workers, while the unemployment rate fell to 3.9% from the 4.2% reported in November, according to Bureau of Labor Statistics data released Friday. December’s unemployment rate is down dramatically from the peak of 14.8% seen in April 2020 and is quickly approaching the pre-pandemic rate of 3.5%.

However, Friday’s jobs report still fell far below experts’ estimates and was more pessimistic than other recent reports. Data from ADP’s National Employment Report released earlier this week, for instance, showed that private, nonfarm payrolls grew by 807,000 in December. And the Dow Jones estimate had payrolls up by 422,000 for the month

It’s worth noting, however, that while hires for December were weaker than expected, these numbers have been consistently revised upward lately, writes Aaron Sojourner, a professor at the University of Minnesota’s Carlson School of Management. Many busy, growing companies are taking longer to respond to the BLS surveys. The BLS, for example, also revised its October and November job figures on Friday, reporting there were 141,000 more jobs added during those two months combined than previously reported.

“Revisions to job growth in recent months have been upward and big, and so the December initial estimate of a soft 199,000 should be regarded with skepticism,” says PNC chief economist Gus Faucher. “The biggest impediment to stronger hiring in late 2021 was a shortage of workers; although the labor force is gradually increasing, it is still down by more than 2 million from before the pandemic.”

The data for the BLS report was collected in surveys conducted in mid-December, so the impact of the latest COVID case surges and the spread of Omicron is likely limited. About 11.1% of employees worked remotely in December due to COVID, consistent with November. However, the surge in cases may have impacted hiring efforts earlier than anticipated. 

“We can expect January employment numbers to continue to trend downward as the virus continues to disrupt hiring and return-to-office plans,” says Bill Armstrong, president of recruiting firm Gava Talent Solutions. That could stall hiring figures, as well as impact the unemployment rate.

The leisure and hospitality sector led with the highest number of hires in December but added only 53,000 jobs. Back in October, the industry was adding over 200,000. Overall, leisure and hospitality added 2.6 million jobs in 2021, still down by about 1.2 million, or 7.2%, from February 2020 when the pandemic started. Jobs in restaurants, bars, and food services—one of the industries hardest hit by the pandemic—increased by 43,000 in December, but overall the sector is out about 653,000 since February 2020.

Yet even as job growth slowed in December, wages continued to rise. U.S. workers at private companies earned an average of $31.31 per hour in December, according to the Bureau of Labor Statistics. Over the past year, workers’ hourly pay has increased by 4.7%. The average hourly wage for production workers was $26.61, up 5.8% year over year.

The overall labor force participation rate was 61.9% in December, unchanged from November, and about 1.5 percentage points lower than prior to the pandemic. Faucher said Friday it’s still encouraging.  

Overall, the number of people either working or looking for work, otherwise known as the labor force, rose by 168,000 last month—the third straight monthly increase.  “Perhaps [it’s] an indication that people are starting to return to the job market in larger numbers,” Faucher said.

Of course, that could shift as the impact of Omicron is more widely felt and may keep workers on the sidelines, including those who are vulnerable to infection, older workers, and parents with young children.

“With workers continuing to reevaluate their priorities and leave their jobs in record numbers, it is more important than ever for employers to listen to workers,” says Karen Fichuk, CEO of staffing agency Randstad North America. “Business leaders can successfully navigate this uncertainty by prioritizing worker health and safety, offering opportunities for training and professional growth, improving salary and benefit offerings, and allowing for increased flexibility.” 

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