The December Employment Situation

We have another confusing monthly jobs report, below what economists expected. The economy added  only 199,000 non-farm payroll jobs in the month of December, according to the Bureau of Labor Statistics. This number is far smaller than the 400,000 that economists predicted before the release. It’s also well below the 2021 average monthly job gain of 537,000. 

The good news is that the overall unemployment rate dropped 0.3 percentage points, down from 4.2% to 3.9%. The labor force participation rate stayed constant from last month at 61.9%.

The overall jobs recovery in 2021 hasn’t reached all workers. While the unemployment rate for white workers is back to pre-pandemic levels for December and fell 0.5% between November and December, the equivalent rate for Black workers increased 0.6% to 7.1% and is 1.1% higher than it was in December 2019. In fact, this was the only racial group that had an increase in unemployment rate this month.

The increase in black unemployment is driven by an increase in the unemployment of black women, which jumped from 4.9% in November to 6.2% in December.

Another factor contributing to a lackluster report: many expected significant upward revision of the November numbers. When the revisions came in, the BLS only added 39,000 jobs to the November report, bringing the total from 210,000 to 249,000. By contrast, revisions to the October report  added another 102,000 jobs from  546,000 to 648,000. Within that context, the last two months of the year look especially disappointing. 

Looking within industries, Accommodation and Food Services had the largest increase in monthly employment with +53,000 jobs added. This is a welcome counterbalance to Tuesday’s JOLTS report for November, which showed a hospitality industry experiencing both a sky-high quits rate and a decrease in new job openings.

Overall, it’s a surprising and unsatisfactory way to close out a year marked by historically tight labor markets and high average monthly job gains. But it’s worth noting that we’re seeing a large divergence in payroll surveys and household surveys, which show household employment up by 651,000. Differences between surveys aren’t unusual, especially during the pandemic, but the gap may indicate future revisions to today’s numbers.

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