As Omicron Spreads, the Economy Adds a lackluster 199K
In December, the labor market added jobs for the 12th month in a row, though slower than many predicted. Economists projected December payrolls to rise by over 400,000, double the pace seen in November but received a disappointing downturn created by service sector hirings.
According to figures released Friday by the Labor Department, the United States added 199,000 employment in December as the Omicron strain of COVID-19 began to spread across the country.
According to the Bureau of Labor Statistics, the unemployment rate dropped to 3.9 percent from 4.2 percent. With strong wage growth — average hourly earnings increased by 4.7 percent over the year, more than the 4.2 percent economists polled by Bloomberg expected — and the rapid decline in the unemployment rate, it appears that a scarcity of available workers is at least in part to blame for the slowdown in hiring.
The slowing of job growth was particularly concerning given the data presented on Friday was collected in mid-December, before the pandemic's most recent round of outbreaks began. Since then, the Omicron variety has sparked a dramatic increase in new coronavirus cases, increasing hospitalizations, people being forced to stay at home from work, and renewed anxiety among employers. Analysts are preparing for a surge in lawsuits to further impede job growth in January and the following months. However, it is too soon to tell how it will affect the labor market in the long run.
The data indicated increasing competition for desperately needed workers, despite the weak job gain in December, as firms fight to keep up with the economy's recovery in general. The unemployment rate fell to its lowest level since March 2019. The labor force participation rate remained stable, while average hourly earnings increased by 4.6 percent on a year-over-year basis in March.
The Labor Department also raised October and November's job growth upward by a combined 141,000 jobs, marking the latest significant upward revision to a poor initial employment report.
According to Joe Brusuelas, the chief economist at tax and audit firm RSM, the change in total employment is 390K when considering the upward revisions to the previous two reports. The trading community may be disappointed, but this is a very positive development from the perspective of the actual economy as a whole."
The employment data for December certainly reflects only a portion of omicron's overall influence on the economy. The two surveys undertaken by the Labor Department to produce the employment data took place the week of December 12, which was well before the number of cases in major U.S. cities began to rise.
Despite this, some industries under pressure from the pandemic experienced little to no job growth in December, a troubling indicator as COVID-19 cases continue to rise at an alarming rate.
In December, the leisure and hospitality sector added only 53,000 jobs, a far cry from the six-digit monthly gains witnessed earlier in the year in the sector. Employment in the healthcare and retail sectors remained stagnant last month. However, manufacturing, construction, and transportation services all experienced significant increases.