December jobs fall short, fail to hit 50% of estimates
Where are the workers? With 10-12 million jobs postings currently open in the U.S., the increase of just 199,000 new non-farm jobs comes as a huge disappointment. Economists had been expecting a reading of 450,000. This is the second month in a row where job growth numbers fell significantly short of economists' estimations.
- U.S. December unemployment rate fell to 3.9% (vs. 4.2%)
- U.S. December payrolls increased 199,000, missing estimates of 450,000
- U.S. December average hourly wages increased 4.7% year over year, surpassing estimates of 4.2%
- U.S. December labor force participation rate was in line with estimations at 61.9%
Positives despite slow job growth
Despite disappointing job gains, there were some positives in the December employment numbers. Many sectors saw notable growth, including:
- Leisure & hospitality
- Professional services
Unemployment also dipped lower, moving to 3.9% versus economists’ estimates of 4.2%.
Labor force participation at record low
The overwhelming theme of the jobs report, however, is the record-low labor force participation rate of 61.9%. The rate was unchanged from November to December, but it remains 1.5 points lower than the last pre-pandemic measurement in February 2020.
Employers continue to find workers, which has been a major contributor to the US economy’s struggle with supply chain management and inflation. Employers paid higher wages in December as year-over-year average hourly earnings rose to 4.7%, a sharper increase than previous estimates of 4.2%. Despite the uptick, wages still lag far behind year-over-year inflation rates of 6.8%.
Markets unfazed by jobs report
Interest rates continue to grind higher with the 10-year Treasury note printing new highs of 1.76% as of last Friday's report. Mortgage rates are expected to be slightly higher in response, with stocks expected to open lower as well. Inflation data will likely prove more important than December's employment numbers, with Consumer Price Index and Producer Price Index reports dropping later this week.
Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.
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