December to Remember, but January to Forget

It was a December to remember for the U.S. labor market. But the late-month pandemic surge could mean that it’ll be a January to forget.

U.S. private-sector employers added 199,000 workers to their payrolls in December — the second consecutive month when job gains missed admittedly sky-high forecasts — but the unemployment rate fell by more than anticipated, declining to 3.9 percent from 4.2 percent in November according to data published this morning by the Bureau of Labor Statistics (BLS). November job growth was revised upward from 210,000 to 249,000 and the participation rate held stubbornly constant.

Despite disappointing job gains, December capped a remarkable year for the U.S. labor market. Total nonfarm payrolls increased by nearly six million workers (the largest annual employment gain since records began in 1940) and the unemployment rate fell by 2.8 percentage points over 2021 (in line with the largest ever year-over-year declines in the unemployment rate). But hiring constraints were clearly weighing on firms’ ability to onboard workers by year’s end.

Employment in key supply chain sectors was decidedly mixed. Truck transportation firms added 300 workers, package delivery firm employment fell by 100 workers (and saw substantial downward revisions to past months due to updated seasonal adjustment factors), and warehousing and storage firms added 5,000 workers in December (all seasonally adjusted). For the trucking industry, December was the slowest month for employment gains since May 2021. However, November trucking payrolls were revised upward; absent those revisions, December would have notched an employment increase closer to 2,000 jobs. All in all, trucking companies added about 50,000 workers to their payrolls in 2021 – in line with payroll gains reported in 2014 and 2018, both recent high points for the freight market.

Of course, the report does not reflect the effects of the late-December Omicron surge. The data reported by BLS were collected for the week of December 12th. That week, the U.S. reported about 138,000 active cases with the Omicron variant accounting for about 38 percent of infections; by early January the country was reporting upward of 500,000 cases with Omicron accounting for 95 percent. 

Hiring pipelines always slow over the holidays, but the end-of-year slowdown is likely to be particularly large this year as recruiting and onboarding team capacity is limited with staff out sick. However, if the Omicron surge peaks relatively quickly – as it has in other countries – it could have only a minor longer-term effect on the labor market. 

Either way, it seems unlikely that 2022 will be able to even approach 2021’s impressive labor market gains – if nothing else, simply because so much progress has already been made.

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Aaron Terrazas
Aaron Terrazas is Director of Economic Research at Convoy where he researches and comments on freight markets and what freight reveals about the broader economy. Prior to joining Convoy, Aaron was a Senior Economist and Director of Economic Research at Zillow. Before that, he was an Economist at the U.S. Treasury Department’s Office of Economic Policy in Washington, D.C. He was educated at Georgetown University and Johns Hopkins University. Aaron has been a runner since age 13 and is a sucker for all endurance sports.