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Friday, January 06, 2023

Comments on December Employment Report

by Calculated Risk on 1/06/2023 09:26:00 AM

With 4.50 million jobs added, 2022 was the 2nd best year for job growth in US history behind only 2021 with 6.74 million.

The headline jobs number in the December employment report was above expectations, however employment for the previous two months was revised down by 28,000, combined.   The participation rate increased, and the unemployment rate decreased to 3.5%.   Another solid report.

Leisure and hospitality gained 67 thousand jobs in December.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 932 thousand jobs since February 2020.  So, leisure and hospitality has now added back about 89% all of the jobs lost in March and April 2020. 

Construction employment increased 28 thousand and is now 153 thousand above the pre-pandemic level. 

Manufacturing added 8 thousand jobs and is now 149 thousand above the pre-pandemic level.

In December, the year-over-year employment change was 4.50 million jobs.

Seasonal Retail Hiring

Typically, retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

Seasonal Retail HiringThis graph really shows the collapse in retail hiring in 2008. Since then, seasonal hiring had increased back close to more normal levels.  However, seasonal retail hiring was down in 2022.

Note: I expect the long-term trend will be down with more and more internet holiday shopping.

Retailers hired 98 thousand workers Not Seasonally Adjusted (NSA) net in December.  

This was seasonally adjusted (SA) to a gain of 9.0 thousand jobs in December.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 participation rate increased in December to 82.4% from 82.3% in November, and the 25 to 54 employment population ratio increased to 80.1% from 79.7% the previous month.

Both are close to the pre-pandemic levels and indicate almost all of the prime age workers have returned to the labor force.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons, at 3.9 million, changed little in December. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons increased in December to 3.878 million from 3.688 million in November. This is below pre-recession levels.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 6.5% from 6.7% in the previous month. This is down from the record high in April 22.9% and is the lowest level on record (seasonally adjusted) (series started in 1994). This measure is below the level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.069 million workers who have been unemployed for more than 26 weeks and still want a job, down from 1.215 million the previous month.

This is below pre-pandemic levels.


The headline monthly jobs number was above expectations; however, employment for the previous two months was revised down by 28,000, combined.  

The headline unemployment rate decreased to 3.5%, and U-6 declined to a record low at 6.5%.

Overall, this was another solid employment report - and a strong year of job gains.