The U.S. economy likely ended up with a month of solid job growth as hiring picked up before the latest surge in Omicron-related infections had a significant impact on the labor market.
The Labor Department is going to release its December jobs report on Friday at 8: 30 a.m. Here are the main metrics expected from the print, compared to consensus estimates compiled by Bloomberg:
The labor market saw 12 consecutive months of job growth in December. In December, consensus economists expect that payrolls in December will increase by over 400,000, or more than double the tally from November, when a slowdown in service-sector hiring had weighed on overall employment growth.
Daniel Zhao, Glassdoor senior economist, said in an email that the job gains in leisure and hospitality and education slowed significantly in November as rebounding Delta cases suppressed jobs growth. The reversal of the Delta wave gave rise to the new Omicron wave, and in December weaker growth in the sectors that are sensitive to COVID will likely have continued. Some suggested that notable Omicron-related impacts to the monthly labor market data are unlikely to appear until at least the January report. The Labor Department collects data for the month's jobs reports during the week, including the 12th of the month, which may have been too early to capture disturbances from the Omicron variant discovered in the U.S. in late November.
Omicron-related disruptions present some downside risk, but they are more likely to be seen in the January employment report, according to Deutsche Bank economists led by Brett Ryan. The four week average of initial jobless claims declined by a bit over 24% between November and December employment survey periods. This was the largest month-over-month decline since August 2020 - 28% when private payrolls increased by over 1 million. Other economic data has been upbeat as the labor market continues to grow, according to the December jobs report. During the survey week, weekly jobless claims came in just above 200,000, or a level below the weekly average from before the flu. ADP reported on Wednesday that private sector employers added back 807,000 jobs in December, nearly double the consensus expectation and marking the biggest rise since May.
Even as jobs return, churn has increased in the labor market, adding pressure on employers looking to bring on and retain workers. As competition for workers increased, so too has wages. Average hourly wages are expected to rise to a 0.4% month-over-month clip in December, while retreating slightly from November's 4.8% rate on a year-over-year basis. These still-elevated wage increases have added fuel to concerns about inflation during the recovery.
Labor force participation remains below pre-pandemic levels, reflecting ongoing disruptions related to the virus, despite heightened demand for workers. The civilian labor force was down by 2.4 million participants as of November compared to levels from February 2020. Although the labor force participation rate went up slightly more than anticipated in November to reach 61.8%, it still wasn't close to the 63.3% mark from February 2020.
Omicron is making the supply-side more difficult. Mohamed El-Erian, president of Queens College at Cambridge University and Allianz Chief Economic Advisor, told Yahoo Finance Live on Thursday that the key number to look at is labor force participation. It's probably the most important metric tomorrow, followed by wages, followed by job creation. Labor force participation is going up as it did last month. I worry that Omicron won't affect demand as much as it's going to affect supply. Emily McCormick is a reporter for Yahoo Finance.