Despite the spread of the omicron variant, the economy added 467,000 jobs to its workforce in January. Even areas that are sensitive to pandemics like restaurants and hotels were big job creators. It appears that employers’ main response was to reduce hours, with the average workweek falling by 0.2 hours, a decline of 0.6 percent. The unemployment rate was unchanged at 4.0 percent.
Revisions Change our View of the Economy
The annual benchmark revisions which include seasonal adjustment factors give a completely different view of the economy for 2021. The revisions saw job growth in November/December revised up by 709,000, resulting in a two-month increase of 1,157,000. The job growth in June, July, and December was revised down by 807,000 to show a total gain now of 1,246,000.
New data show that the rate of job growth at the end 2021 was much higher than previously thought. However, it was slower in the summer months. The revisions resulted in 217,000 additional jobs for the year. This brings the total gain for 2021 to 6,665,000. The 2020 job loss stands at 9,292,000. We’re now 2.9 million jobs below the pre-pandemic level.
The pace of wage growth is still very rapid
This report shows that wage growth is not slowing, but there is no evidence to the contrary. Comparing the three months ending November-January with the three prior months (August-October), the overall private sector wage growth was 6.5 percent annually, which is slightly higher than the 5.7% rate recorded over the past year. Retail wages grew at an annual rate of 5.8 percent, compared to a rate of 5.4 percent over the previous year. The rate of wage growth in restaurants slowed somewhat, with a 10.6 percent increase, compared to a 13.0% rate over the past year.
The wage data could be slightly distorted by the decrease in hours. A decrease in hours is equivalent of a decline of private sector employment exceeding 700,000. If the majority of hours lost were among lower-paid workers, it would increase the average monthly pay.
We are seeing little change in the unemployment and employment rates
The employment-to-population ratio (EPOP) rose 0.3 percentage point, but all of that was due to the annual change in population controls. It would have fallen by 0.1 percent without these changes. The controls had no effect on the unemployment rate. It rose by 0.1 percent. The prime-age EPOP (25 to 54 years) climbed 0.1 percentage point to 79.1 %, a level that was not reached after the Great Recession and February 2018.
Black Unemployment falls 0.2 percentage point to 6.9 Percent
Black unemployment is still 1.5 percentages above its pre-pandemic low. White unemployment, however, is only 0.4 percentage points above the pre-pandemic low.
The unemployment rate among Asian Americans dropped slightly to 3.6 percentage percent. It is still 0.2 percentage points higher than the unemployment rate of whites. The unemployment rate for Asian Americans was generally lower than the white unemployment rate before the pandemic. Hispanics had a 4.9 percent unemployment rate, which was 0.9 percentage points higher than its pre-pandemic low.
Other Data from Household Survey Looks More Normal
The share of long-term unemployed (more than 26 weeks) dropped sharply to 25.9 per cent. Although still high, this is closer to pre-pandemic levels. The share of unemployment attributable to voluntary quits increased to 14.5 per cent, which is higher than the low unemployment rate. The percentage of involuntary part time workers dropped sharply, making it the lowest share of employed since 2000. The U6 measure of labor market inequalities fell to 7.1%, just 0.3 percentage point higher than its all-time high.
Mixed Performance in January for Construction and Manufacturing
January saw manufacturing add 13,000 jobs, its ninth consecutive monthly increase. The sector’s employment has dropped 1.8 percent since the start of the pandemic. The weather-related loss of 5,000 in construction may have been responsible. Employment is down by 1.3 percent compared to pre-pandemic levels.
Many Pandemic-Affected Sectors Did Well In January
The month saw an increase in airline employment of 6,800, which is more than 1.0 percentage above pre-pandemic levels. Restaurants added 108,200 jobs, and hotels added 22,600 jobs. Arts and entertainment added 20,100 jobs. These sectors are now experiencing a decline in employment of 8.0 percent and 22.3 percent respectively, compared to pre-pandemic levels. These sectors account in the overwhelming majority the jobs shortage from pre-pandemic.
Retail added 61,000 employees in January. This increase, combined with upward revisions, drove the sector’s employment levels above their pre-pandemic peak.
Nursing Homes and Child Care Add Workers
In January, the number of nursing home jobs increased by 2,100. This is only the second increase since the pandemic. The pandemic caused a 15.0 percent drop in employment. While employment in childcare has increased by 5,600, it is still down 11.4% from its prepandemic level.
Workers in state and local education are still far below pre-pandemic levels
Although state and local education added 28400 jobs in January but employment is still down 3.6% from pre-pandemic levels, This is likely due to difficulty in obtaining wages comparable to the private sector, but it could also be partly due to political attacks on teachers in recent weeks.
Another strong report
Contrary to most expectations, it doesn’t seem that the omicron variant dampened job growth in January. The labor market is returning to normal in many aspects, though the level of employment in the public sector and the leisure- and hospitality industries are still well below pre-pandemic levels.
Payrolls continue to grow at an impressive pace. There is evidence of slowing in the fastest growing sectors, but wage growth above 6.0 percent cannot continue without serious inflation problems.