The labor market continues to present us with some confusing signals in the close of 2021. Payroll growth once again came in under expectations while the unemployment rate shows a continued swift drop in joblessness. Both sides of today’s report agree the labor market is recovering. The disagreement is just over how fast it is happening.
The household survey once again contains much of the good information in this report. Unemployment dropped as employment rates increased. Noticeably, the prime-age employment rate rose to 79% and is on track to hit its pre-pandemic level later this spring. 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.
But the number of payroll jobs added in December was disappointing. The gains were disproportionately located in leisure and hospitality, with a quarter of the 211,000 private sector jobs gains coming from that sector. However, the pace of progress there has slowed alongside the rest of the labor market. The still strong wage gains for production workers suggests that many employers may have to continue bidding up pay in order to get more hires through the door.
The new year is off to a rocky start. These less than stellar numbers were recorded before the omicron variant started to spread significantly in the United States. Hopefully the current wave of the pandemic will lead to limited labor market damage. The labor market is still recovering, but a more sustainable comeback is only possible in a post-pandemic environment.