According to the latest data from the Bureau of Labor Statistics, the U.S. economy added far fewer jobs than expected in December.
Economists had predicted a rise of 422,000 non-farm payroll jobs to be added, versus the 199,00 that actually occurred. The unemployment rate declined to 3.9 percent, or 6.3 million people - economists had predicted 4.1%. The rate was still slightly above pre-crisis levels amid reports of severe labor shortages - the hope is that they will decline further in the coming months as companies fill widespread vacancies.
Earnings rose slightly higher than expected, as well, with the average hourly earnings at 4.7% vs. the 4.2% expected and a revised 5.1% in November.
Every category tracked pulled back from earlier gains in the year. Retail continues to shed jobs - and will likely accelerate in January due to omicron. Leisure and hospitality jobs gained 53,000, below the 211,000 seen in October. Transportation and warehousing jobs were under 19,000 during the month, after 42,000 in November, while professional and business services positions rose by 43,000 after a gain of 72,000 during the prior month. Education and health services employment gains totaled 10,000, slowing from 14,000 in the prior period.
Massive layoffs in leisure and hospitality are accelerating in January, with Cineplex reporting January layoffs of 5000 employees due to impacts of the omicron variant.
The report lines up with other economic data that showed companies struggling to retain staff despite rapidly rising labor costs. The Labor Department's Job Openings and Labor Turnover survey (JOLTS) showed employees quit their jobs at a record rate in November. Workers are so confident about their job prospects that 4.5 million Americans quit their jobs in November, 4.2 million Americans quit their jobs in October, and 4.4 million quit in September. Little wonder economists have dubbed this phenomenon The Great Resignation.
So what was a crisis of layoffs is now a crisis of shortage of workers. Many of those who were either let go or walked off the job could be staying on the sidelines for a host of reasons: fear of contracting COVID, a lack of childcare options, trying their hand at opening their own business, or deciding to take early retirement thanks to swelling home and stock prices. Those who are taking new jobs are generally moving higher-paid jobs elsewhere, often in entirely new fields. High-risk/ low-paying roles in retail and hospitality are seeing the brunt of this impact.
It remains to be seen if companies can succeed in their mission of repairing an increasingly leaking bucket. With massive numbers of vacancies and high churn happening in the departments responsible for employee acquisition and retention (recruiting and human resources), the people required to manage these processes are in short supply. Even if this part of the equation is corrected, new recruiting and HR hires will need onboarding time, and then ramp up to make up for losses of historical knowledge on systems, brand, processes, etc.