American businesses hired 199,000 workers in December, far fewer than predicted
America's employers added 199,000 jobs in December, falling far short of analyst forecasts.
Economists had forecast that employers added 400,000 jobs last month, according to a survey by data provider FactSet. December hiring was little changed from the 210,000 jobs added in November, the Department of Labor said Friday.
In a positive sign for the economy, the nation's unemployment rate fell to 3.9% in December from 4.2% the previous month. That's the lowest rate since 3.5% in February 2020, before the pandemic erupted across the U.S. and crippled the economy.
The disappointing job growth last month comes amid the surge in COVID-19 cases caused by the Omicron variant, which has closed college campuses and prompted the cancellation of public events. Also concerning is that the survey period for the government's latest employment report ended December 18, before the sharp spike in COVID-19 cases spread across much of the nation. At the same time, employers are struggling to fill jobs amid a tight labor market, creating hurdles to hiring amid a worker shortage.
"The muted 199,000 gain in non-farm payrolls and the more muted increase in labor force participation suggest that worker shortages were becoming a bigger restraint on employment growth, even before the Omicron surge in infections, which could knock hundreds of thousands off payrolls in January," Michael Pearce, senior U.S. economist with Capital Economics, said in a report.
2021: Stronger job growth than pre-pandemic
Despite the disappointing job growth last month, the nation's job growth averaged 537,000 per month in 2021 — much higher than the average monthly job growth of 178,000 in 2019, prior to the pandemic. While businesses are hiring, with employers dangling higher wages and bonuses to lure new workers, there are 3.6 million fewer employed people than prior to the pandemic.
"Looking over the full year, 2021 jobs data is pretty mind-boggling," said Heidi Shierholz, president of the left-leaning economic think tank EPI. "We added 6.4 million jobs and the labor force participation rate rose. Wage growth was strong and workers were able to quit their jobs to take better ones."
Still, some industries still haven't regained their pre-pandemic staffing levels. Leisure and hospitality businesses, such as restaurants and hotels, added 2.6 million jobs last year, but there are still 1.2 million fewer workers in the sector than prior to the pandemic, the government said on Friday.
One bright spot in December's report is the rise in labor force participation among so-called "prime age" workers, or Americans between 25 to 54 years old, said Indeed economic research director Nick Bunker in an email.
"Noticeably, the prime-age employment rate rose to 79% and is on track to hit its pre-pandemic level later this spring," Bunker said. "Concerns about the stubborn flatlining of the overall labor force participation should take into consideration that employment for this core demographic group continues to rise."
Wages rising
Economists noted that the December report was mixed, with signals of both strength in the job market and some headwinds.
Among the details they cited:
- Average hourly earnings increasd 4.7% during the past year.
- Employers hired 249,000 people in November, an upward revision of the initial survey's finding of 210,000 hires that month.
- A number of industries added workers in December, including leisure and hospitality, professional and business services, manufacturing, construction and transportation and warehousing.
- Retail was a "soft spot" — with a net loss of 2,000 jobs, Oxford Economics noted.
- Black unemployment increased by 0.6 percentage points to 7.1% in December, which left-leaning economics think tank EPI noted marks "the only group trending in the wrong direction."
January chill?
The jobs miss in December may not bode well for early 2022, when economists predict the Omicron surge will impact hiring to a greater extent than it did last month.
"It is only a question of time before the highly infectious variant hinders labor market progress," said Lydia Boussour, lead economist at Oxford Economics, in a research note earlier this week.
She added, "Record coronavirus caseloads are disrupting business activity due to staff illness or quarantine, keeping workers away from job seeking due to health concerns and school disruptions, and leading consumers to curb their spending on in-person services."
—With reporting by the Associated Press.