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Economy in Brief

U.S. Payroll Growth Disappoints; Earnings Strengthen As Jobless Rate Falls in December
by Tom Moeller  January 7, 2022

• Hiring growth is slowest of 2021.

• Jobless rate falls to lowest since February 2020.

• Earnings growth picks up.

As the Omicron variant emerged, labor market signals were mixed in December. Nonfarm payroll employment increased 199,000 (4.6% y/y), down from a 249,000 gain in November, revised from 210,000. For all of 2021, payrolls increased 2.8% after falling 5.8% in 2020. The level of payroll jobs remained 2.3% below its peak in February 2020. A 399,000 rise in December payrolls had been expected in the Action Economics Forecast Survey.

The unemployment rate declined to 3.9% in December from 4.2% in November. Earlier figures were revised. A 4.1% rate had been expected. Employment in the household survey increased 651,000 last month following a 1.090 million November rise. The labor force rose 168,000 after rising 516,000 in November. The overall unemployment rate, including those who were marginally attached or working part-time for economic reasons, fell to 7.3% last month from 7.7% in November. It was the lowest level since February of 2020 and compared to a recession high of 22.9% in April 2020.

Average hourly earnings increased 0.6% in December following a 0.4% November gain, revised from 0.3%. The 4.7% y/y increase compared to a 5.1% November high.  A 0.4% monthly gain had been expected for December.

The rise in payroll employment weakened last month as private service sector hiring rose 157,000 (5.5% y/y) after a 198,000 November gain. It was the weakest rise since January of 2021. Leisure & hospitality sector jobs rose 53,000 (19.6% y/y). The level of hiring in professional & business sector employment improved 43,000 (4.9% y/y) but temporary help employment declined 1,600 (+8.1% y/y). Trade, transportation & public utilities employment rose 30,000 last month (3.1% y/y) but hiring in retail trade fell 2,100 (+2.1% y/y). Education & health services employment rose 10,000 (2.4% y/y). The number of information services jobs held steady (+5.4% y/y) and financial sector employment gained 8,000 (1.8% y/y).

Government sector payrolls declined 12,000 in December (+1.9% y/y), off for the fifth straight month. Local government employment fell 10,000 (+2.3% y/y), also down for the fifth consecutive month while the number of state government jobs held steady (+1.9% y/y) after declining in the each of the prior three months. Federal government payrolls weakened 2,000 (-0.2% y/y).

Factory sector employment rose a lessened 26,000 last month (2.9% y/y), up for the eighth consecutive month. Construction sector payrolls improved 22,000 (2.1% y/y) in December, firm for the fourth straight month. Employment in the mining & logging sector improved 6,000 last month (8.8% y/y).

Average hourly earnings in the private sector increased 0.6% in December (4.7% y/y) for the third month in the last four. Information sector earnings surged 1.6% (2.4% y/y). Earnings in the leisure & hospitality sector strengthened 0.8% (14.1% y/y) while earnings in education & health services also increased 0.8% (4.7% y/y). Financial sector pay rose 0.7% (4.9% y/y) and professional & business service sector earnings also gained 0.7% (6.2% y/y). Construction sector earnings firmed 0.4% (4.6% y/y) while factory sector pay improved 0.2% (4.4% y/y).

The length of the private sector average workweek was 34.7 hours in December for the third straight month. The financial sector workweek held at 37.5 hours. The information sector workweek improved to 37.1 hours in December. Hours-worked in the professional & business service sector eased to 36.6 after three months at 36.7 hours and the education & health services workweek was stable at 33.3 hours. The leisure & hospitality workweek was 26.3 hours for the third straight month. The factory sector workweek slipped to 40.3 hours from 40.4 hours. The construction workweek rose sharply to 39.3 hours, the highest level in three months.

From the household employment survey, the lower 3.9% unemployment rate in December occurred as the labor force participation rate held steady at 61.9%, but remained below the 63.4% high in January and February of 2020. The participation rate for teenagers eased to 36.1%, but for individuals aged 20-24, it rose to 72.0%, which was the highest level since February 2020. For workers aged 25-54, the rate held steady at 81.9% but remained below the January 2020 high of 83.1%. For men aged 25-54, the rate fell to 88.0%, its lowest since May. For women of that age, the participation rate surged to 75.9%. It has been trending higher since April of last year when it was 73.3 hours. For workers aged 55 & over, the participation rate edged higher to 38.5% but remained below the July-2019 high of 40.5%.

The employment/population ratio for all workers rose to 59.5% in December but has been trending higher since early 2020. It nevertheless remained well below the February 2020 high of 61.2%. A greatly lessened 17.358 million (-51.1% y/y) worked at home because of the coronavirus.

The average duration of unemployment fell to 28.6 weeks in December, remaining well above the level of 23.7 weeks twelve months earlier. The median unemployment duration declined to 12.9 weeks and remained below a recent high of 19.6 weeks in June.

The teenage unemployment rate held at 10.9% last month, well below the record 32.6% in April of 2020. The rate for workers aged 20-24 fell to 7.1% in December. For workers aged 25-54, the rate fell to 3.5%, significantly below the April 2020 high of 12.8%. For those over 55, the jobless rate fell to an expansion low of 3.0%.

By educational attainment, the rate of unemployment of workers without a high school diploma fell sharply in December to 5.2% and remained below the 9.8% rate one year earlier. High school graduates without any college were a lessened 4.6% unemployed last month, down from the April 2020 high of 17.6%. Those with some college but no degree were unemployed at a 3.6% rate, down sharply from the April 2020 peak of 15.3%. College graduates saw their unemployment rate ease to 2.1% last month, just above the 1.9% low in February of 2020.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Dec Nov Oct Dec Y/Y 2021 2020 2019
Payroll Employment 199 249 648 4.6% 2.8% -5.8% 1.3%
 Previous Estimate -- 210 546 -- -- --
  Manufacturing 26 35 52 2.9 1.7 -5.0 1.0
  Construction 22 35 44 2.1 2.4 -3.0 2.8
  Private Service-Producing 157 198 614 5.5 3.7 -6.6 1.4
  Government -12 -21 -66 1.9 -0.6 -3.1 0.7
Average Weekly Hours - Private Sector 34.7 34.7 34.7 34.7 34.8 34.6 34.4
Private Sector Average Hourly Earnings (%) 0.6 0.4 0.6 4.7 4.0 4.8 3.3
Unemployment Rate (%) 3.9 4.2 4.6 6.7 5.4 8.1 3.7
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