The numbers: The U.S. created a lackluster 199,000 new jobs in December, signaling that persistent labor shortages and another major coronavirus outbreak are holding back the economy.
The increase in employment was well below Wall Street’s expectations. Economists polled by The Wall Street Journal had forecast 422,000 new jobs.
The U.S. jobless rate, meanwhile, slipped to 3.9% from 4.2% and drifted to a new pandemic low. The rate stood at 3.5% right before the pandemic.
The reason for the sharp decline: A separate survey of households from which the rate is derived actually showed a much bigger increase in employment for the second month in a row.
The household survey showed that 651,000 people found jobs in December after a 1.1 million gain in November. Fewer people also said they are unemployed.
While the household poll is less reliable, sometimes it picks up changes in employment faster than the survey of businesses.
In another good sign, more people entered the labor force for the third month in a row. That kept the so-called labor-force participation rate at a pandemic high of 61.9%.
In any case, businesses have tried to attract more workers by offering signing bonuses, higher pay and better benefits. Hourly pay jumped 19 cents, or 0.6%, to $30.31 last month.
Wages rose 4.7% in 2021. The last time wages rose that rapidly was several decades ago.
Even the big increase in wages, however, has not been enough to offset the increase in inflation. Consumer prices rose at a 6.8% yearly pace through November.
Big picture: Businesses laden with customer orders are aggressively seeking to fill more than 10 million open jobs in order to keep up with demand. But it’s been slow going.
The latest wild card is the omicron strain of the coronavirus. It could disrupt business for a month or two, economists say, but the U.S. is likely to prove resilient again just as it did during the delta wave last fall.
The December jobs report is unlikely to sway the Fed from altering plans to remove stimulus for the economy in the next several months. The U.S. has plenty of demand for labor, goods and services.
Key details: Companies in the hospitality business such as restaurants and hotels led the way in hiring last last month. They added 53,000 jobs.
Omicron could deliver another blow in the short run, but the industry is slowly recovering from the pandemic.
Professional businesses hired 43,000 people, manufacturers added 26,000 jobs, construction employment rose by 22,000 and transportation and warehouse firms beefed up payrolls by 19,000.
Government and retailers cut a small amount of jobs.
Employment gains in November and October were raised by a combined 141,000, lessening the blow from the December headline number. Prior job reports have repeatedly been revised higher, suggesting the government’s early estimate has been skewed to the downside.
Altogether, the U.S. economy regained 6.5 million jobs in 2021, but employment still well short of the pre-pandemic peak.
The U.S. employed 152.5 million people just before the pandemic erupted. Total employment rose to 148.9 million at the end of last year.
Looking ahead: “The Omicron wave is expected to constrain the labor supply recovery in early 2022 with an increased number of fearful potential applicants, sick workers and pestering childcare disruptions,” said economists Gregory Daco and Lydia Boussour of Oxford Economics.
“The labor force has increased for three straight months, perhaps an indication that people are starting to return to the job market in larger numbers,” said chief economist Gus Faucher of PNC Financial Services.