Despite the fact that the United States is still millions of jobs short of pre-pandemic levels, hiring slowed dramatically towards the close of last year, providing a sharp hint that firms are struggling to fill open positions.
According to the Labor Department, the economy created 199,000 jobs in December on a seasonally adjusted basis, down from 249,000 jobs gained in November, according to data released Friday. The increases were the fewest in a year that saw record employment creation despite the fact that the economy shrank.
While at the same time, there were indications that people who were seeking for work last month were able to find them. The unemployment rate dropped to 3.9 percent from 4.2 percent, according to the Bureau of Labor Statistics. As a result of increased rivalry among firms for employees, wages continued to rise, climbing 0.6 percent in December and 4.7 percent for the year.
When taken together, the statistics show that a scarcity of available labour — rather than a lack of demand — may be a contributing factor to the slowdown in hiring.
In the words of Julia Coronado, founder of the research company MacroPolicy Perspectives, “the unemployment rate is a solid indicator, and it’s going down rapidly.” “It speaks to the fact that there is not enough labour supply to fulfil demand — not that demand is failing.”
Economists believe the news increases the likelihood that the Federal Reserve will raise interest rates soon in order to calm the economy, since wage growth threatens to keep prices rising as firms attempt to pay their rising labour expenses.
The figures for December bring to a close a year marked by fluctuations in an employment market that is still intertwined with the epidemic almost two years after it began.
And they might cause a split-screen on the status of the economy as the country heads into a midterm election year that will decide the fate of President Biden’s programme as well as control of key state governorships and legislatures, according to some analysts.
Democrats refer to salary increases and total employment gains as evidence of their success. More than 6.4 million jobs were generated in total last year, the largest yearly rise on record, as the economy emerged from the quagmire produced by the epidemic. The economy created an average of 537,000 jobs per month in 2021, despite a little slowdown towards the end of the year. Unemployment fell at a quicker rate than almost anybody had predicted.
“I believe that this is a historic day for our economic recovery,” Vice President Joe Biden said at a White House press conference on Friday, adding that the jobless rate has dropped by the most in history in a single year. He emphasised the importance of the economic stimulus package that was approved last year, claiming that “America is back to working.”
Republicans, on the other hand, used the recent slowdown in hiring to criticise Mr. Biden’s economic plans. Representative Kevin McCarthy of California, the House minority leader, stated on Twitter that the government’s December hiring was “another major fail” and that the administration “has undermined what should’ve been a V-shaped rebound.” McCarthy is the House minority leader.
There was a key caveat in the analysis, which was released on Friday: the data was gathered in mid-December, before the pandemic’s newest wave exhibited its full intensity. Since then, the Omicron variety has triggered a dramatic increase in coronavirus infections, resulting in an increase in hospitalizations and an increase in persons being absent from work.
There is common belief that the Omicron boom will be short-lived and that the economy would thereafter find its footing in the following months. Economists, on the other hand, are prepared for a rise of lawsuits seeking to halt employment growth in January and the following months.
“It’s truly like a giant game of Ping-Pong,” Danielle Boyce, the owner and general manager of an American Flatbread restaurant in Middlebury, Vermont, described the experience. “You’re continuously attempting to make adjustments.”
Ms. Boyce said that recruiting has been exceptionally tough in recent months, to the point that she has had to take up bartending responsibilities to supplement her income. She is concerned that the current pandemic outbreak would just exacerbate the situation further.
When Middlebury College in neighbouring Middlebury, Vermont, became completely remote in December after a rise in cases on campus, “business slowed down,” she added. Some of her staff employees, who were also students, departed town before the rest of the group. Her staff of two waiters and a bartender was finally complete this week, but she soon discovered that one of the workers was unwell and awaiting the results of a Covid-19 test, which was scheduled for the next day.
As the pandemic roller coaster continues to mount, it is becoming more difficult for companies to prepare ahead. They are already dealing with difficulties in recruiting and maintaining staff, and now they are dealing with a new slew of questions.
The labour force participation rate remains low when compared to its February 2020 level of 63.4 percent, but the combination of rapidly declining unemployment and rapidly increasing wages has prompted many economic policymakers to declare that the economy is at or near “full employment,” which is a state in which everyone who wants a job and is available to work can easily find one.
Jobless rate of 3.9 percent in December was “a simple number,” according to Brian Deese, the director of the White House National Economic Council, who wrote on Twitter that “behind it are millions of American workers and families” whose “lives are better because of the historically strong economic recovery in 2021.”
Despite the fact that millions of jobs and employees have been lost since the epidemic began, economists believe that the economy is “at or near” full employment as a result of the latest report released by the Federal Reserve.