December Job Growth Falls Well Short of Hopes

The 199,000 increase in payrolls was less than half of expectations

Businesswoman with hand in pocket holding laptop while walking in city
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December saw the slowest pace of U.S. job growth in a year, falling well short of economists’ expectations and adding worrisome signs for an economy grappling with another surge of COVID-19 cases. 

Key Takeaways

  • The economy added 199,000 jobs in December—less than half of what economists expected and the smallest number in a year.
  • The data was collected mid-month, before the latest spike in COVID-19 cases likely put a damper on economic activity, some analysts said.
  • In a positive development, the unemployment rate dropped more than expected, falling to 3.9% from 4.2%.
  • Near record levels of job openings and higher wages should sustain the pandemic recovery if and when the impact of the latest COVID-19 wave fades, many economists said.  

The country added 199,000 jobs in December—less than half of what economists expected—though the unemployment rate did dip to 3.9% from 4.2%, beating forecasts for 4.1% and closing in on the 3.5% we saw before the pandemic began, the Bureau of Labor Statistics said in its monthly jobs report Friday. While there were bright spots in the data, the smallest monthly gain in jobs since December 2020 is especially concerning given the numbers were collected mid-month, before the latest surge in COVID-19 cases from the omicron variant, some economists said.

“New cases of COVID-19 have skyrocketed to record highs in recent weeks, casting a pall over today’s report,” said Daniel Zhao, senior economist and lead data scientist at job hunting website Glassdoor. “You might see a much weaker job market in January, but the fundamentals of the recovery are strong, so hopefully we should see job gains pick back up once the omicron wave has died down.”

The recent spread of the omicron variant, by keeping workers home and potentially forcing businesses to close, could lead to a net loss of jobs in January, Zhao said. And slowing job growth is especially hard to interpret given the large number of positions that remain to be filled. A different report earlier this month showed there were 10.6 million job openings at the end of November, near the record high level of 11.1 million seen earlier in 2021 (outnumbering the 6.3 million unemployed).

Reasons for Sitting Out 

“December's report underscored that workers are only likely to trickle back into the jobs market as reasons for sitting out, like financial cushions, health concerns and childcare issues do not unwind all at once,” economists at Wells Fargo Securities wrote in a commentary.

Broken down by sector, leisure and hospitality had the biggest gain of 53,000 jobs. The broad “professional services” category added another 43,000, and manufacturing and construction added 26,000 and 22,000 jobs, respectively. The government sector, on the other hand, lost 12,000 jobs and retailers lost 2,100. 

Employers have reported that widespread hiring difficulties have slowed the production of goods and services, contributing to the supply chain problems that are fueling inflation. And the share of the U.S. population working or actively looking for work stayed stuck at 61.9% for a second month, only about halfway back to a full pandemic recovery.

Wage Growth

On the plus side, a different measure of job growth the bureau reported Friday showed a much healthier increase of 651,000 employed people. That’s based on data from a monthly survey of U.S. households rather than businesses, and includes agricultural workers and the self-employed—a measure that’s prone to more dramatic swings month to month. 

And as employers competed to fill openings, the average pay increased 19 cents an hour to $31.31—the most for a single month since April—and 4.7% higher than a year earlier.

“The fundamentals of the economy are still strong. Employer demand is strong, and wage growth is high. That suggests once we get past this wave of the pandemic, we should see job gains pick up again,” Zhao said. “Of course, we have to get past this wave of the pandemic first.”

The job market continued to dig itself out of its pandemic-induced hole in December, but even after taking into account an additional 141,000 jobs the bureau said had been added in October and November, the economy was still 3.6 million jobs short of its pre-pandemic level, a gap that would take a year and a half to fill at December’s pace. 

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

Article Sources

  1. Bureau of Labor Statistics. “Employment Situation Summary - 2021 M13 Results.”

  2. Moody’s. “Employment Situation.”

  3. Centers for Disease Control and Prevention. “CDC COVID Data Tracker.”

  4. Bureau of Labor Statistics. “Employment and Earnings Summary Table B.”

  5. Wells Fargo. “Both Presents and Coal in the December Employment Report.”