December Unemployment Rate Falls but Jobs Disappoint

A worried man looks at a laptop in a cafe.

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

On January 7, the US Bureau of Labor Statistics released jobs data for December, and the results were mixed. On the other hand, the national unemployment rate fell to 3.9%, down from 4.2% in November. At this point, unemployment is at its lowest level since the pandemic began, and is close to where it was in February 2020, before the COVID-19 crisis hit home.

On the other hand, job creation stalled in December, with only 199,000 new non-farm jobs added. Given that economists were expecting 422,000 new jobs to be added, this is a huge disappointment.

Not surprisingly, job creation was the highest in the leisure and hospitality industry, which added 53,000 new jobs in December. However, this industry has also shed a lot of jobs during the pandemic, so it has had more jobs to add.

Wages have also gone up

Average hourly wages rose 0.6% in December and are up 4.7% compared to the previous year. That 0.6% increase exceeded the 0.4% increase in wages that analysts had been expecting. However, given that the CPI reading for November came in at 6.8%, workers are not necessarily gaining purchasing power despite wage increases. If anything, they might still be behind.

Does falling unemployment mean stopping more stimulus aid?

Right now the pandemic is spreading, and in the coming weeks, we could see more people forced to leave their jobs temporarily due to lockdown, infection or forced quarantine. But the good news is that health experts say the current surge in COVID-19 may be relatively short-lived. If so, it would not necessarily increase unemployment across the country.

Consider the fact that the unemployment rate in December is only a few degrees higher than the 3.5% unemployment rate we saw in February 2020, and it’s hard to prove the importance of more widespread aid. As such, Americans shouldn’t expect a fourth stimulus check to arrive in their bank accounts anytime soon.

Obviously, if things go significantly for the worse, lawmakers may look to ask for more help. But the unemployment situation will really need to change dramatically for that to happen. This is not something anyone should wish for.

However, the only thing Americans can hope for is the passage of President Biden’s plan to build back better. Currently, this spending bill is frozen in the Senate, and if it does not pass, the enhanced child tax credit will not take effect this year. Credit has already done a great job lifting American 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 undoubtedly do a world of good.

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