Hiring Stalls in December but Unemployment Falls Further

Employment gains in December were less than half of expectations, yet the unemployment rate fell 30 basis points, indicating some disconnect between the two employment measurement surveys conducted monthly by the Bureau of Labor Statistics (BLS).

According to the Current Employment Statistics (CES) program or establishment survey, the U.S. added 199,000 jobs in December on a seasonally adjusted annual rate. That was the weakest monthly gain of 2021. At the same time, the Current Population Survey (CPS) or household survey showed a gain of 651,000 workers for the month and the headline or U3 unemployment rate fell from 4.2% to 3.9%.

The two surveys rarely show similar results, primarily because one surveys employers about their workers, while the other asks households how many are employed or working in their household. This tends to capture the self-employed, agricultural, and gig workers more accurately and results in higher numbers, generally. The household survey shows roughly 156 million employed compared to about 149 million in the establishment survey.

Additionally, the unemployment rate measures only the number of unemployed workers who are actively looking for work, so long-term unemployed, discouraged workers and others dropping out of the workforce are not counted in the U3. December’s 3.9% rate is the lowest since February 2020, just before the pandemic shutdowns, but the number of employed in both surveys is about 3 to 3.6 million short of pre-pandemic levels.

The unemployment rates for both men and women aged 16 or older fell from 4.2% to 3.9% but the rate for teenagers was 10.9% for the second consecutive month. By race, whites saw an improvement of 50 bps to 3.2% while black or African Americans had an increase of 60 bps to 7.1% in December. Hispanics had a moderate decrease of 30 bps in their unemployment rate from November to 4.9%.

The civilian labor force participation rate remains stubbornly low at 61.9% in December. It had averaged close to 63% from 2014 to 2019 before dropping to almost 60% during the pandemic shutdowns. Its recovery has been hampered by increased early retirements and others not returning to the workforce. Likewise, the employment-population ratio, which fell almost 10 full points from February to April 2020, has been recovering but is still below pre-pandemic rates at 59.2%.

The annual change in average hourly earnings of $1.40 (to $31.31) was 4.7% greater than last December’s rate and the third consecutive month above $1.40. However, the CPI index including food and energy rose 6.8% in November, cutting into those gains. Industry wage growth varied greatly with Leisure and Hospitality wages jumping 14.1% for the year, while Information employees registered a 2.4% annual increase. Competition for fewer restaurant and other service workers had a dramatic effect on wage growth. Professional and Business Services workers enjoyed a 6.2% annual increase in hourly wages, but most other industries averaged a 4.5% increase.

Several industries reported unadjusted unemployment rates slightly higher than the month before with Information up by 80 bps and Financial Activities, Other Services and Construction up 30-40 bps. The remainder were flat or down by about 40 bps, with the exception of the smaller Mining/Logging industry which fell 280 bps from November.

The percentage of workers that telework decreased only slightly to 11.1% in December from 11.3% in November, according to the BLS’s supplemental data measuring the effects of the coronavirus pandemic on the labor market. The rate of telecommuting appears to have leveled off as employers continue to deal with the Omicron variant and its threat to the workforce.

In other December BLS data, the number of unemployed leaving or quitting their job decreased from 837,000 in November to 724,000 in December. The number of unemployed for 27 weeks or longer dropped from 2.19 million in November to 2.01 million in December. The number of those working part-time that want full-time work fell by 337,000 from last month to about 3.93 million, while the number of workers who prefer part-time positions decreased by 125,000 to about 20.3 million.

Workers marginally attached to the labor force fell by about 526,000 from last December to 1.67 million and the number of discouraged workers stood at 468,000, down 193,000. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.

The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, fell to 7.3% in December compared to 7.7% last month and 11.7% in December 2020.

Industry Focus

Leisure and Hospitality dominated the modest job gain total for December, accounting for almost 27% of all jobs gained for the month. Significant contributions came from the Professional and Business Services, Trade, Transportation, and Utilities, Manufacturing, and Construction industries. As with last month, Government employment recorded a monthly loss, while there was no change in the Information industry employment level.

• The Leisure and Hospitality industry’s monthly gain of 53,000 jobs was almost entirely in accommodation and food services (+52,600), particularly food services and drinking places (+42,600). The arts, entertainment, and recreation subsector added only 700 jobs for the month.

• The Professional and Business Services industry gained 43,000 jobs in December with most of them in the high-paying professional and technical services sector (+36,700). The computer systems design subsector accounted for 10,200 of those jobs. The administrative and waste services sector added only 4,400 jobs, as gains in services to buildings and dwellings (+7,800) were offset by cuts in business support services (-6,400).

• The Trade, Transportation, and Utilities industry added 30,000 jobs in December with more than half in transportation and warehousing (+18,700). Wholesale trade added 13,700 jobs for the month with durable goods accounting for 8,800 of them. Retail trade lost 2,100 jobs in December as a big gain in general merchandise stores (+15,800) was cancelled by an almost equally large drop in sporting goods stores (-12,500).

• The Manufacturing industry’s gain of 26,000 jobs in December was comprised largely of durable goods manufacturing (+20,000), with solid gains in machinery (+7,000), motor vehicles and parts (+4,200), and nonmetallic mineral products (+2,100). Nondurable goods manufacturing subsectors were mixed but chemicals (+2,300) and plastics and rubber products (+2,000) performed well.

• The Construction industry gained 22,000 jobs for the month with a strong gain of 12,900 jobs in nonresidential specialty trade contractors. The heavy and civil engineering construction subsector gained 10,400 jobs.

• The Other Services sector had a solid gain of 13,000 jobs in December with solid contributions across its three subsectors. Repair and maintenance added 4,800 jobs, while personal and laundry services added 3,600 and membership associations and organizations added 4,800 jobs for December.

• The Education and Health Services industry’s monthly gain of 10,000 jobs was affected by staffing shortages for hospital staff and nurses as each subsector lost about 5,000 jobs. The social assistance sector added 9,200 jobs despite a loss of 3,700 jobs in child daycare services. Educational services gained 3,400 jobs for the month.

• The Financial Activities industry added 8,000 jobs in December with much of that gain coming from real estate and rental leasing (+5,300). The finance and insurance sector added another 3,600 jobs to the total for the month.

• The Mining and Logging industry added 6,000 jobs in December, led by the support activities for mining subsector (+3,600). The oil and gas extraction subsector gained 2,300 jobs for the month.

• The Information industry was a net zero jobs for the month with cutbacks in hiring for the motion picture and sound recording (-6,200) subsector cancelling the gains in the publishing industries (+4,000) and other information services (+1,900) subsectors.

• Recent government education employment cutbacks were not the cause for the overall Government sector’s monthly loss of 12,000 jobs this month. Both local (-7,800) and state (-5,100) government excluding education posted losses in December.