December Employment Slows

Payroll employment is expected to rise by 200,000 in December after jumping 263,000 in November. Hiring In the public sector is expected to rise by 35,000 jobs, which would leave 165,000 for the private sector during the weakest month of the year. Hiring by public schools, which continue to struggle with acute staffing shortages, is expected to account for the bulk of the gains in the public sector. 

Gains in leisure and hospitality and health care are expected to buoy overall gains. Many resorts, restaurants and hospitals remain understaffed. The surge in RSV, flu and COVID infections are exacerbating labor shortages.

Manufacturing and construction employment are expected to be weak; much of the manufacturing sector is already in contraction territory so hiring has slowed, while contractors’ activity is slowing in reaction to higher rates. Cancellations of new home sales remain elevated. Plans to build computer chip and electric vehicle plants have picked up but have not been executed. The bulk of the spending associated with the infrastructure bill will not fully ramp up until the mid-2020s.

Average hourly earnings are expected to rise 0.4% from November and 5% from a year ago. That means earnings increases are still well above the 3-4% pace that the Federal Reserve believes is appropriate to get inflation back to its 2% target.

The unemployment rate, which is determined by the household survey, is expected to hold at 3.7%. Participation in the labor market has come off the highs earlier this year and is expected to edge down to 62% in December. That is well below the pre-pandemic peak of 63.4% and slightly below the post-pandemic peak of 62.4% that we saw last summer. A loss due to retirements accounts for much of the drop in participation. The residual is more of a blow by gender. Women have come back, despite acute childcare problems, while men continue to lag. The pandemic exacerbated the global gender gap, with women weathering the pivot to online education much better than men.

That said, both men and women in the U.S. lag other nations by a landslide. Women’s participation slipped to 73^rd in the world in 2021, while men’s slipped to 120^th. The loss in male participation is global in scope.

Separately, a trifecta of RSV, flu and COVID infections are expected to have sidelined even more people in December than November. The ranks of those out sick in November hit 1.6 million, nearly 70% above an average month in the 2010s. Those ranks likely rose again in December. That not only costs those without paid sick leave; it forces employers to backfill amidst staffing shortages. Long COVID and elevated sick days appear to be cutting into hours worked along with childcare problems, which flared in October. The latter receded in November but likely picked up again in December.