We expect a net gain in total employment of 475,000 jobs and a decline in the unemployment rate to 4.1% when the jobs report for December is published on Friday.
We expect a net gain in total employment of 475,000 jobs for December.
Strong job creation in higher-paying jobs in goods production, construction, manufacturing, business services and the financial sector should underscore what will most likely be a year in which 6.5 million jobs were created.
Recent labor market and income data indicate that the initial estimate of both the Bureau of Labor Statistics’ establishment survey, which is responsible for the top-line number, and the household survey, which produces the closely followed unemployment rate, carry the possibility of a tighter labor market despite public health risks around the omicron variant.
The December employment report will be just as much about revisions to previous months’ data that will almost certainly point to a much stronger labor market than that implied by current data.
Given our expectations around such revisions, market participants may focus just as much on the two-month payroll net revision to total employment as on the traditional top-line monthly estimate.
The combined December gains and revisions will bolster the notion that this is the tightest labor market in generations, resulting in less than one unemployed person per job opening.
First, the past few monthly reports have had strong revisions to past estimates that point to stronger job gains than initially estimated. For this reason, the November report will most likely see an upward revision to the establishment survey estimate in total employment. This revision will almost certainly be seen inside the service sector in general and the retail trade in particular.
This kind of upward revision typically occurs as the economy enters an expansionary phase.
Given the large shocks associated with the pandemic over the past two years, the backward-looking revisions have been quite robust and there is no reason to expect that the December report will be any different.
Second, the Bureau of Labor Statistics will publish its annual five-year revision to its seasonally adjusted data that produces the household survey that includes the traditional unemployment rate estimate and the labor force participation rate.
There is a modest chance that investors and policymakers will be talking about unemployment rates below 4% either this month or over the next 60 days.
That is how strong the American labor market is, and given that the economy was down by 22 million jobs in April 2020 as the shock of the pandemic set in, it is one of the more remarkable recoveries in our lifetimes and is a testament to the resilience of the domestic economy.
We expect an improvement of 0.4% in average hourly earnings, which should translate into a 4.2% year-over-year gain and an increase in the labor force participation rate to 61.9%.