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.
OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.
Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.
The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.
The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.
A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.
Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.
The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.
But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.
“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.
The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.
Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.
Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.
The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.
This report by The Canadian Press was first published Oct. 31, 2024
