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U.S. Adds 199K Jobs in December, Unemployment Falls to 3.9%

David Krechevsky
Jan 07, 2022

First American Financial economist says report still may give the Fed reason to accelerate tightening of monetary policy.

KEY TAKEAWAYS
  • December increase in employment considered weak given that job growth had averaged 537,000 per month in 2021.
  • Unemployment rate declined by 0.3 percentage point to 3.9% in December, and the number of unemployed persons decreased by 483,000 to 6.3 million.
  • Average hourly earnings for all employees on private nonfarm payrolls increased by 19 cents to $31.31.
  • Construction employment rose 22,000 in December, but is still 88,000 below its February 2020 level.

Whether it was the surge of the Omicron variant nationwide or something else, job growth in the United States cooled off in December, adding 199,000 positions, while the unemployment rate dipped to 3.9%, the U.S. Bureau of Labor Statistics reported today.

The 199,000 increase was considered weak given that job growth had averaged 537,000 per month in 2021.

Jobs were added across a number of sectors, including in construction as well as in leisure & hospitality, professional & business services, manufacturing, and transportation & warehousing. Construction employment rose by 22,000 in December, though that was down from monthly gains averaging 38,000 over the previous three months. In December, job gains occurred in nonresidential specialty trade contractors (+13,000) and in heavy and civil engineering construction (+10,000). Construction employment is still 88,000 below its February 2020 level.

First American Financial Corp. Deputy Chief Economist Odeta Kushi called the December employment report underwhelming, but said it still may give the Fed reason to accelerate tightening of monetary policy.

“The Fed will be monitoring the December jobs report to help determine its timeline on tightening monetary policy, as the unemployment rate reached a fresh pandemic-era low and higher wages stoke fears of broadening inflation, which may speed up the Fed’s timeline.

In December, average hourly earnings for all employees on private nonfarm payrolls increased by 19 cents to $31.31. Over the past 12 months, average hourly earnings have increased by 4.7% In December, average hourly earnings of private-sector production and nonsupervisory employees rose by 18 cents to $26.61.

The unemployment rate declined by 0.3 percentage point to 3.9% in December, and the number of unemployed persons decreased by 483,000 to 6.3 million. Over the year, these measures are down by 2.8 percentage points and 4.5 million, respectively.

In February 2020, prior to the COVID-19 pandemic, the unemployment rate was 3.5% and the number of unemployed totaled 5.7 million. The labor force participation rate was unchanged at 61.9% in December but remains 1.5 percentage points lower than in February 2020.

The number of persons not in the labor force who currently want a job was little changed at 5.7 million in December. This measure decreased by 1.6 million over the year, but is 717,000 higher than in February 2020. These individuals are not counted as unemployed because they were not actively looking for work during the four weeks preceding the survey or were unavailable to take a job.

Nonfarm employment has increased by 18.8 million since April 2020, but is down by 3.6 million, or 2.3%, from its pre-pandemic level in February 2020.

Employment in leisure & hospitality continued to trend up and led job growth in December, adding 53,000 position. Leisure & hospitality has added 2.6 million jobs in 2021, but employment in the industry is down by 1.2 million, or 7.2%, since February 2020. Employment in food services and drinking places rose by 43,000 in December, but is down by 653,000 since February 2020.

Employment in professional and business services also continued its upward trend in December (+43,000), while manufacturing added 26,000 jobs.

In December, employment showed little or no change in other major industries, including retail trade, information, financial activities, health care, other services, and government.

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