January 07, 2022 | 09:11
U.S. Payrolls: Poor Packaging But Nice Gift
Despite another disappointing headline payrolls gain, the details of the December jobs report revealed underlying strength, at least before the full impact of Omicron hits. Nonfarm payrolls rose 199,000, the weakest print in a record year of job gains (averaging 537,000 per month). But the disappointment largely ends there. The prior two monthly gains were bumped up by a combined 141,000. Job growth was broadly based, led by leisure and hospitality (and notably food services up 43k, despite Omicron), professional and business services, manufacturing, and construction. Retail, however, posted a second straight decline. The household survey continued to post impressive results, likely reflecting the return of gig and other contract workers to the labour force. Employment here jumped another 651,000 following over one million new jobs the prior month. This chopped the unemployment rate down three tenths to 3.9%, now just four ticks shy of pre-virus, half-century lows. The 2.8-ppts slide in the jobless rate last year is the largest on record. The labour force grew 168,000 last month, but the participation rate held firm at 61.9%, still 1.5-ppts short of February 2020 levels. It will be rough sledding at the start of the year for the part rate to make any progress given rising Omicron anxiety.
The tight labour market continues to pressure wages higher. Average hourly earnings popped 0.6%, though a high year-ago comparison allowed the yearly rate to retreat to 4.7% from 5.1%. But the base effects become much harder in the months ahead.
Aggregate work hours were on the light side, up 0.2% in the month, though the quarterly gain of 4.7% annualized keeps our 5.5% call for Q4 GDP growth largely on track, assuming a moderate rise in productivity.
Our jobs scorecard grades the December report at 84.4, well above the passing grade of 50.
Bottom Line: The U.S. labour market may have lost a little momentum at the end of a stellar year, largely due to the lack of available workers rather than available positions, but it is holding up nicely, at least so far. January will paint a weaker picture, and the remaining months are in the hands of the latest COVID wave.