The December Jobs Report: Payroll Gains Aren’t What They Seem
The December Jobs Report: Payroll Gains Aren’t What They Seem
Don’t be misled by the seemingly solid payroll gain of 227K. Today’s Jobs Report offers little evidence of a labor market rebound. The topline number was always expected to overstate underlying strength, inflated by the return of workers from strikes and disruptions caused by major storms. To see the true picture, it’s essential to average this report with the prior month.
Doing so reveals a continued slowdown. Average monthly job gains in the fourth quarter so far are just 132K—down from 159K in the third quarter and well below the 2015-2019 pre-pandemic average of 190K. Job growth is undeniably decelerating.
A slowdown in job creation wouldn’t necessarily be alarming if it were primarily driven by demographic shifts, such as population aging or slower immigration, both of which constrain the growth of the working-age population. But the data points to a more worrying issue: a gradual rise in labor market slack. The unemployment rate ticked back up to 4.2% in November, reversing its brief dip to 4.1% at the end of the third quarter. The broader U6 measure, which includes those marginally attached to the labor force and underemployed workers, edged up to 7.8%. Meanwhile, the prime-age employment-to-population ratio slipped further to 80.4%, and the number of people outside the labor force increased.
Even the job gains themselves remain very narrowly concentrated. Once again, the bulk of the growth came from health care and social assistance, government, and leisure and hospitality. While health care and government hiring have been unusually strong over the past year, recent declines in job openings suggest they are unlikely to sustain that pace. Without a turnaround in other sectors, overall job growth could slow further.
There’s little sign of such a turnaround yet, but there are reasons for cautious optimism. Real wages are rising, the stock market remains robust, and falling interest rates could eventually stimulate hiring. These factors should help stabilize the labor market and potentially drive broader job gains in the months ahead. For now, though, the labor market remains in a slowdown, with job seekers and workers waiting for the anticipated tailwinds to kick in.
Take a tour through the Jobs report in ZipRecruiter charts.
