December Jobs Report Preview: Modest Rebound to Close Out 2021
Daniel Zhao
Chief Economist at Glassdoor | Jan 5, 2022
This Friday, the Bureau of Labor Statistics will release the December jobs report, closing out 2021. The job market is likely to reflect a modest improvement in December, with payroll gains rebounding after a sluggish November - but any improvement will be muted by the worsening pandemic. Ultimately, December's report will be the capstone for a historic year in the job market that saw unanticipated labor shortages, record high job openings and likely the most employees added to payrolls of any year since 1939.
- Job gains to accelerate: Payroll gains are likely to show acceleration in December, rising above 400,000 from the sluggish 210,000 jobs added in November. November's weak job gains may also be revised upward to match the stronger data received from the household survey. The resurgent pandemic and rise of the Omicron variant, however, is likely to keep a lid on job gains.
- Modest unemployment decline: The unemployment rate likely declined modestly in December, down to 4.1 percent. So far in 2021, the unemployment rate has declined 2.5 percentage points, which is the best calendar year performance since 1983.
- Weakness in COVID-sensitive sectors: Job gains in leisure & hospitality and education slowed significantly in November as rebounding Delta cases suppressed jobs growth. Weaker growth in COVID-sensitive sectors will likely have continued in December as the resurgent Delta wave gave way to the new Omicron wave.
- Shifting holiday hiring patterns: Retail hiring was unusually weak in November, while transportation & warehousing job gains continued to outperform. The explosion of e-commerce during the pandemic may have disrupted usual holiday hiring patterns by shifting jobs from retail to transportation & warehousing. Labor shortages may also have encouraged employers to convert seasonal holiday workers into full-time workers, rather than lay them off in December and January.
Looking Back at 2021 and Ahead at 2022
Through November 2021, the U.S. has gained 6.1 million jobs, the most of any year since the payroll survey began in 1939. The labor market made significant progress climbing out of the hole it started the year in.
However, looking back at the first eleven months of 2021, the recovery did not play out as expected at the beginning of the year. The largest job market surprise in 2021 was labor shortages, due to both the slower-than-expected return of workers to the labor force and the faster-than-expected surge in employer demand.
During the year, economists were continually predicting a sudden rush of workers back into the labor force whether because of the end of the winter wave, increasing vaccination leading into the summer, the reopening of schools in the fall or the expiration of enhanced unemployment benefits on Labor Day. But none of these factors was enough to unleash a flood of workers, and that lesson should carry forward into 2022. While the year ahead is likely to see solid improvement in the job market, the pandemic is not going to disappear overnight and labor force gains are likely to remain slow and steady rather than a sudden flood. Labor force participation will be a critical measure to watch in 2022 to see whether improvements there can sustain the jobs recovery.
Additionally, employers ended 2020 with 6.8 million open jobs—an already significant recovery from the worst of the recession — but job openings skyrocketed over 2021, peaking over 11 million. While job openings may moderate in 2022 as the labor market normalizes, job openings are still likely to remain above pre-pandemic records as demand remains strong and employers remain desperate for workers.
Conclusion
While 2022 is likely to get off to a sluggish start due to the new Omicron variant, the fundamentals that drove record jobs growth in 2021 remain similar in 2022. Demand for workers is at record highs and employers are competing aggressively for workers. There are still millions of Americans on the sidelines of the job market and the hope is that an improving public health situation could unlock strong job gains by drawing workers in. However, the pandemic is not going away quickly, so in the near term, employers will likely continue to fight over a limited supply of workers, likely keeping labor shortages around for a little while longer.
Daniel Zhao
Daniel Zhao is Chief Economist at Glassdoor. On Glassdoor's Economic Research team, he has conducted research using Glassdoor's unique data on a variety of topics affecting job seekers and employers ranging from the health of the job market to pay transparency to employee engagement & retention. His work has been cited in publications like the New York Times, the Harvard Business Review and more. Prior to joining the Economic Research team, he also worked on improving the user experience for Glassdoor’s consumer jobs product and mobile app. He holds a bachelor's degree in applied mathematics and economics from Harvard College.
Tags:Labor Market
