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The U.S. added a paltry 199,000 new jobs in December and just 249,000 in November at a time when it should be creating maybe double that amount. A bad sign for the economy? Not so fast.
Employment gains in the past two months are undoubtedly weaker than they should be. The U.S. lost more than 20 million jobs early in the pandemic and the number of people working still hasn’t returned to pre-crisis levels.
However, a separate part of the employment report — one that normally gets less attention — suggests hiring has been a lot stronger in the past few months compared to the headline number prized by Wall Street
DJIA,
and Washington.
A survey of households shows that 651,000 people found jobs in December and 1.1 million in November. That’s 1.74 million jobs — almost four times as many as the combined headline numbers for the past two months.
The headline numbers are drawn from survey of business establishments that is much more reliable over time. The survey queries almost 700,000 work sites each month to gauge how many people are employed.
The household survey only questions some 60,000 households each month and is more prone to error.
“The labor market continues to present us with some confusing signals in the close of 2021,” said Nick Bunker, economist research director at Indeed Hiring Lab.
Yet the household survey sometimes captures turning points in the economy or labor market faster than the poll of businesses, economists note. It’s possible the same thing could be happening now.
“Historically, the household survey has been more volatile and thus less reliable,” said David Wagner, portfolio manager at Aptus Capital Advisors. “But if people are truly shifting from employment to gig work — as many anecdotes suggest — then the household survey might actually be painting a more accurate picture of the labor market because it captures all workers, not just those on the payroll.”
Chief economist Steve Blitz of TS Lombard also said the household survey might be “more representative of work in the post-COVID world.” More people are self-employed, he pointed out, and not as many businesses are responding to the government survey as usual.
The business survey itself belatedly suggests job growth is stronger than it seems. The government has sharply raised monthly employment gains since last summer as it received late responses from the companies it surveys.
Take October. The government initially said 531,000 new jobs were created in the month. The estimate was then raised to 546,000 and finally to 648,000.
The Bureau of Labor Statistics has admitted its ability to count new jobs has been affected by the pandemic. It’s had to rely more on Web-based responses than it did prior to the crisis.
To be sure, some of the shortfall in hiring reflects the ongoing labor shortage.
Millions of people retired early in the pandemic. Others are too afraid to go back to work. And constant disruptions at school and daycare centers has made it harder for parents to keep a full-time job, especially lower-income Americans.
Eventually hiring will accelerate as the virus recedes, economists say, particularly with wages rising at the fastest pace in decades. Yet a labor shortage could persist for quite some time.
