Employment Report Is Good Economic News But More Needs To Be Done

Today’s release of the December employment report showed positive job growth, although below some forecasts.  At the same time, the unemployment rate fell below 4%  for the first time since the pandemic began.  So don’t be disappointed by the jobs number—the labor market is strong, and today’s report is good news for the economy.

Cecilia Rouse, Chair of the White House Council of Economic Advisers, reminds us that the three-month average job gain in the economy is 365,000 per month, and today’s report revised job growth upwards for October and November.  Rouse also noted that the low unemployment rate came a higher employment-to-population ratio, not from people leaving the labor force.  Both of those numbers indicate a healthy labor market.

Expectations had been high for December job growth.  Earlier this week, the payroll processing firm ADP estimated December’s private job growth at 807,000, the biggest jump since May 2021.  Dow Jones had predicted growth of 375,000, and other analysts also expected big numbers.

But today’s Bureau of Labor Statistics (BLS) report came in much lower—an increase of 199,000 nonfarm jobs for December.  Because ADP and other estimates of job growth were significantly higher, many media outlets are calling today’s number “disappointing.”

Experts know monthly employment numbers can be volatile.  I served as Executive Director of the Congressional Joint Economic Committee, where we held monthly hearings when the BLS report was released. We often would have to scramble to make sense of two issues in the data—volatile month-to-month changes and seeming discrepancies between the job creation numbers and the unemployment rate.

Many people don’t realize the jobs number and the unemployment rate come from two different surveys—jobs from surveying employers, and unemployment from surveying households.  It isn’t surprising that those two sources can vary from month to month.  Economists prefer to use rolling three-month averages to smooth out this volatility.

Additionally, the definition of “employment” varies somewhat between the employer and household surveys. BLS has an excellent discussion of the two surveys on its website. But for those of you who don’t necessarily enjoy reading statistical definitions, let’s just say that many factors (a broader definition of employment in the household survey, new business startups or closures, workers on furlough, survey sampling error, and others) can create differences between the two surveys.

BLS provides a useful chart adjusting the household survey numbers using the narrower jobs survey definition.  It shows both that the household and employer surveys track closely over time, and that applying the narrower definition to household data brings the two surveys into very close alignment.

So don’t get too depressed about the “disappointing” job creation numbers.  But today’s numbers do reflect some worries we need to address.

First, the December survey was conducted before the Omicron variant had really taken hold.  If the variant has major impacts on employment, we should see those in the January survey data.

Second, Black and Hispanic unemployment remains higher than for whites, and Black unemployment actually ticked up in December.  The Economic Policy Institute’s Elise Gould (a fantastic resource for understanding these numbers and other labor force trends) notes that Black workers are “the only group trending in the wrong direction.”

And even with the strong economy under President Biden, in the face of a continuing pandemic, we are still 3.6 million jobs below our pre-pandemic high.  That’s why Congress needs to pass the Build Back Better act and other job creating efforts, especially as Omicron threatens to disrupt the economy.

Bottom line?  Don’t be too “disappointed” by today’s report.  Job growth and the overall labor market remain surprisingly strong in the face of the continuing pandemic.  But our recovery isn’t complete.  We need active government policies to continue recovering, avoid economic threats from the pandemic, and provide greater equity and economic security for working families.