Key Takeaways:

• 199,000 new jobs created is lowest in over a year and far below the prior 2021 monthly average of 568,000;
• 350,000 jobs remain open in construction;
• Thirty percent more workers quit their jobs in December than in the corresponding month prior to the pandemic;
• Employees are now in the driver’s seat with their demands including higher wages and flexible work schedules.

By Manuel Gutierrez, Consulting Economist to NKBA

Total employment for the month of December grew by just 199,000, which represented the lowest number of jobs created in in over a year (Figure 1). The aggregate of available jobs now stands at 10.6 million, as employers’ efforts to attract new workers have been largely unsuccessful despite promises of higher wages and other incentives. December’s numbers were far lower than the 568,000monthly average job growth between January and November of last year.

Job creation for private businesses numbered  211,000 for the month, illustrated by the dark blue line in Figure 1, but there was a drop of 12,000 in government employment during the same period, the fifth consecutive monthly drop for that sector.

Overall employment rose by 6.4 million jobs last year. Although this is the highest number of jobs created in any year since 1950, it is still short of pre-pandemic employment levels by 3.6 million.  It also hides the fact that 30 percent more workers quit their jobs in December 2021 than in December of 2019, with 57 percent more jobs available over that period.

It’s no secret that employees have been leaving the workforce in record numbers. According to a special report on 60 Minutes, 20 million people have quit jobs in just the second half of 2021, some with no intention of seeking new employment. Retail and Hospitality are among the segments most affected by this trend, with many saying it’s just not worth it to stay at their jobs. Some are taking a break and plan to rejoin at a later point. Generous government stimulus and unemployment policies have allowed this to happen, but that’s not the whole story. Many have decided to explore new career paths with so many positions open. The days of employers telling workers they are lucky to have a job appear to be over – at least for now, as the social contract of work is being rewritten. Along with higher wages, many workers are demanding a flexible work schedule.

The pandemic has been largely responsible for this sea change in employment dynamics. Prior to the advent of COVID- 19, 1 in 67 people worked exclusively remotely. That figure is now 1 in 7. This trend has led to much more geographic flexibility, as many are leaving high-cost housing markets like Los Angeles and San Francisco in favor of smaller cities such as Austin, Texas and Greenville, South Carolina where housing is far more affordable.

One in 7 people now work remotely vs. just 1 in 67 prior to the pandemic.

Although hourly wages are 5.8 percent higher than they were a year ago, consumer prices have risen by 6.9 percent during the same period, so those workers actually have less buying power. A move to cities with more affordable housing can tackle that problem.

The leading sectors contributing to job growth were Hospitality and Professional Services, which jointly accounted for nearly half of all the jobs added last month (Figure 2.)

Despite the gains in each of these sectors, they still lag pre-pandemic levels. Current Hospitality employment is 7 percent below its February 2020 level. However, employment in Professional services is now virtually the same, off by just 0.2 percent.

Manufacturing added 26,000 positions in December,  accounting for 13 percent of the total gain, while Construction was up by 22,000. These sectors are near their corresponding pre-pandemic employment levels, off by under 2 percent apiece. This is little consolation for the Construction industry, which still has 350,000 open jobs.

The Entertainment industry has the longest road to travel to reach pre-pandemic employment levels, with a gap of 11 percent. Within that industry, Museums are 14 percent below employment levels of February, 2020, followed closely by the 12 percent shortfall for Amusement parks.

As for unemployment, the rate fell further to 3.9 percent in December, nearly three percentage points lower than a year earlier when it stood at 6.7 percent. The unemployment rate has consistently declined since it peaked at 14.7 percent in April of 2020.

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