US unemployment sinks to 3.9%

WASHINGTON (AP):

The nation’s unemployment rate fell in December to a healthy 3.9 per cent – a pandemic low – even as employers added a modest 199,000 jobs, evidence that they are struggling to fill jobs with many Americans reluctant to return to the workforce.

The drop in the jobless rate, from 4.2 per cent in November, indicated that many more people found work last month. Indeed, despite the slight hiring gain reported by businesses, 651,000 more workers said they were employed in December compared with November.

Still, the data reported Friday by the Labor Department reflected the state of the job market in early December – before the spike in COVID-19 infections began to disrupt the economy. Economists have cautioned that job growth may slow in January and possibly February because of omicron cases, which have forced millions of newly infected workers to stay home and quarantine. The economy is still about 3.6 million jobs short of its pre-pandemic level.

For now, steady hiring is being driven by strong consumer demand that has remained resilient despite chronic supply shortages. Consumer spending and business purchases of equipment are likely propelling the economy to a robust annual growth rate of roughly 7 per cent in the final three months of 2021. Americans’ confidence in the economy rose slightly in December, according to the Conference Board, suggesting that spending was probably healthy for much of last month.

Wages also rose sharply in December, with average hourly pay jumping 4.7 per cent compared with a year ago. That pay increase is a sign that companies are competing fiercely to fill their open jobs. A record-high wave of quitting, as many workers seek better jobs, is helping fuel pay raises.

Low unemployment and rapid wage gains, though, could further heighten inflation as companies raise prices to cover rising labor costs. Price increases have already surged to a four-decade high, prompting a sharp pivot by the Federal Reserve, from keeping rates low to support hiring to moving toward raising interest rates to combat inflation. Most economists expect the Fed to raise its benchmark short-term rate, now pegged near zero, in March and to do so two or three additional times this year.

More broadly through the economy, though, job growth will likely take a big hit this month from the omicron variant, which has sickened millions of Americans, forced airlines to cancel thousands of flights, reduced traffic at restaurants and bars, and caused some major school systems to close, potentially keeping some parents at home with children and unable to work.

That could make it even harder for companies to remain fully staffed and could slow the economy, too.

Omicron has forced so many workers to call in sick, it’s disrupting businesses ranging from ski resorts to airlines to hospitals.

The wave of infections is also likely weighing on jobs at restaurants and bars. The number of Americans willing to eat at restaurants started to slip in late December, according to the reservations website OpenTable.

But because omicron is less virulent than previous COVID-19 variants and few states or localities have moved to limit business operations, economists say they believe its economic impact will be short-lived.