December Jobs Come In Well Under Expectations, Even As Unemployment Drops To 3.9%

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The December jobs figures are a big disappointment for many. As reported by various news agencies, total non-farm employment increased by 199,000—less than half of the estimated 400,000 to 420,000. Earlier the effects of the Omicron version were expected to be hard in the first quarter of 2022, as the December survey took place in the middle of the month.

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what are the reasons? It’s impossible to know exactly, but here are some possibilities.

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More options for workers, less for employers

There is an ongoing “great resignation”, which is tied tightly to the high number of jobs available per unemployed person.

Over the years, jobs have been growing faster than the number of people available to do them. This number has jumped from about 1.3 jobs per capita at the end of August 2021 to about 1.6 jobs by November 2021. The more jobs per capita, the more choices people have in work opportunities, while fewer people are available to fill jobs.

Growth has been particularly rapid in jobs with more specialized and complex skill requirements in technical, scientific and engineering positions, which means even tighter availability of people to hire. When labor is scarce, jobs are more difficult to fill and, therefore, the number of actual jobs can be withheld.

a mismatch of samples

Going back to the idea of ​​the Great Recession is that people are leaving jobs at an enormous rate. In Job Openings and Labor Turnover Summary (JOLTS) Report For November—from those that bring the number of monthly jobs (Bureau of Labor Statistics, or BLS)—there were 6.3 million separations, of which 45 million were leaving. Another 1.8 million were layoffs, vacations and other separations.

4.5 million was a chain high – a large number of people were leaving jobs, many of whom may have taken on or are looking for others. Companies may have to focus on backfilling jobs, leaving them less time to recruit during the December sampling week.

Some reports put forward the Omicron variant of COVID-19 as the main factor. It’s hard to tell. Omicron’s news broke in early December, but did it create enough anxiety to keep people from looking for jobs? Maybe but hard to say. As Anu Gaggar, global investment strategist at Commonwealth Financial Network, said in a note today, “Non-farm payroll numbers were a disappointment, rising to less than half of economists’ expectations, and O’Micron’s influence is fully in this print.” Didn’t even come.”

getting back to normal

However, another possibility is that the country is moving towards normalcy recently. The next graph shows employed people as a percentage of the civilian labor force:

The 96.1% level in December 2021 is in the same ballpark as 95.9% in December 2017, 96.1% in December 2018 and 96.5% in December 2019. Looking at that last figure a little more room, but not that far, versus 93.3% in December 2020.

Put together a recovering economy, the long-term trend of increasing the number of jobs per capita, the speed at which companies can and will add new jobs, the trend of declining birth rates, the hostility towards allowing immigration , and people looking to get out of low-wage and poor-condition employment (creating job opportunities when looking for a new employer), and there comes a point where expectations of big job growth all the time are unrealistic.

A combination of factors appears to suggest that job creation in the US will decline. In fact, with an unemployment rate of less than 4%—which economists used to ballpark full employment—how could anyone expect even more?

Although all these numbers recall people who are moderately involved or who are discouraged, they remain hidden in these discussions.

“However, if we include marginally engaged and depressed workers (U-6 measure), 7.3% of the US population is currently un/employed,” Gugger says. “Overall, there was a mixed message in this print – payroll growth numbers may sound depressing, but the underlying story is a lack of labor availability, which is manifested in rapid wage growth. Unemployment rates below the Fed’s long-term equilibrium level may have been skewed.” The combination of the decline and accelerating wage growth brings the Fed’s March meeting into play for the first rate hike of this cycle.


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