The US added just 199,000 jobs in December, falling well short of expectations as employers battle workplace disruptions due to the highly contagious Omicron variant, the Labor Department said Friday.
Despite the lower-than-expected payrolls, the US unemployment rate fell to 3.9 percent, down from 4.2 percent in November and near what the Federal Reserve considers to be maximum employment. Wages also rose for the month.
Economists expected the economy to add 422,000 jobs in December, according to Dow Jones. The month’s hiring totals followed a dismal November report that also missed expectations. November’s initial report of 210,000 was revised upward to 249,000.
Stock indices were mostly flat following the release of the lower-than-expected numbers.
December’s figures concluded a year of record job growth as the US economy bounced back from the COVID-19 pandemic. President Biden is expected to address the report later this morning.
The leisure and hospitality sector added 53,000 jobs in December. For the full year, the industry, which was hit hard during the pandemic, added 2.6 million jobs.
Professional and business services added 43,000 jobs in the month, while the manufacturing sector added 26,000.
The jobs report signaled some positive economic trends. Wages rose 0.6 percent for the month and were up 4.7 percent compared to the same month one year earlier, topping analysts’ expectations.
The labor force participation rate held at 61.9 percent, or 1.5 percent points lower than it was in February 2020.
Despite the record uptick in 2021, payrolls remain well below their pre-pandemic levels. Employment is still more than 3 million jobs lower than it was in February 2020.
The unemployment rate fell as companies compete for talent in a tight labor market. Employers posted 10.6 million job openings in November, while a record 4.5 million Americans quit their positions.
Earlier this week, data released by the Labor Department showed 207,000 initial jobless claims for the week ending on Jan. 1. Unemployment claims, seen as a proxy for layoffs, remain near historic lows, signaling a solid landscape for American workers.
The rise of the Omicron variant has raised fears about further economic disruption in the coming weeks. Many employers have delayed their plans to return to the office amid a record surge in daily COVID-19 cases.
Economists will be watching closely to see how the Omicron variant impacts jobs growth, as well as the economy at large, in the near future. The job report was based on a mid-month survey of businesses and households, near the start of the Omicron surge.
“Unfortunately the economy’s path is still tethered to the pandemic and Omicron is going to deliver a significant blow to the economy in the first quarter,” Ryan Sweet, a senior economist at Moody’s Analytics, told Reuters ahead of the report.
The falling unemployment rate detailed in the jobs report likely affirms the Fed’s plan to hike interest rates by as soon as March. Fed Chair Jerome Powell has indicated the central bank wanted the economy to reach full employment before it would raise rates.
In minutes from the Fed’s December policy meeting released earlier this month, officials indicated a tight labor market and surging inflation could prompt them to raise interest rates sooner than expected.