December Unemployment Rate Falls but Jobs Disappoint

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  • The unemployment rate fell to 3.9% in December, the lowest level since the start of the pandemic.
  • Nonfarm payroll jobs only increased by 199,000, which is less than half of what economists anticipated.

The latest jobs report is a mixed bag.

Though the omicron variant is currently wreaking havoc across the country by fueling a surge of COVID-19 cases, the one silver lining is that so far, it hasn't led to any major economic shutdowns. In fact, throughout December, weekly jobless claims were low, leading analysts to have high hopes for a decline in the national unemployment rate.

On Jan. 7, the U.S. Bureau of Labor Statistics released its December jobs data, and the results were a mixed bag. On the one hand, the national unemployment rate dropped to 3.9%, down from 4.2% in November. At this point, unemployment is at its lowest level since the pandemic began, and it's close to where it sat in February 2020, before the COVID-19 crisis hit home.

On the other hand, job creation stalled in December, with only 199,000 new nonfarm payroll jobs added. Given that economists were expecting to see 422,000 new jobs added, that's a big disappointment.

Not surprisingly, job creation was highest in the leisure and hospitality industry, which added 53,000 new positions in December. That said, that industry also shed a lot of jobs during the pandemic, so it's had more positions to add.

Wages rose as well

Average hourly earnings rose 0.6% in December and were up 4.7% compared to one year prior. That 0.6% increase outpaced the 0.4% uptick in wages analysts were anticipating. However, given that November's Consumer Price Index reading came in at 6.8%, workers aren't necessarily gaining buying power despite wage increases. If anything, they might still be falling behind.

Will a decline in unemployment mean no more stimulus aid?

Right now, the pandemic is raging, and in the coming weeks, we could see more people forced out of their jobs temporarily due to closures, infection, or forced quarantine. But the good news is that health experts say the current COVID-19 surge may be relatively short-lived. If that's the case, it won't necessarily lead to an increase in joblessness across the country.

Throw in the fact that December's unemployment rate is only a few notches higher than the 3.5% jobless rate we saw in February 2020, and it's hard to make the case for more widespread aid. As such, Americans should not anticipate a fourth stimulus check hitting their bank accounts anytime soon.

Obviously, if things were to take a notable turn for the worse, lawmakers might look to dish out more aid. But the unemployment situation would really need to change drastically for that to happen. And that's not something anyone should be wishing for.

That said, one thing Americans can hope for is the passing of President Biden's Build Back Better plan. Right now, that spending bill is stalled in the Senate, and if it doesn't pass, the boosted Child Tax Credit won't be in play this year. The credit has already done a great job of pulling U.S. families out of poverty, and while it's not the same thing as a stimulus check, if it stays in place for 2022, it will no doubt do a world of good.

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