Insights and Perspective

 

Insights and Perspective

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Business and Household Surveys Continue to Diverge in December

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for December 2021 on Friday, January 7th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. However, the different performances between the surveys as of late may be revealing how the U.S. labor force is shifting during the pandemic recovery.

Employment in the U.S. rose by 199,000 jobs. It amounts to less than half of expectations of forecasts that were in the 400,000s with the Geographic Solutions, Inc. forecast at 493,000 and the WSJ Economist Survey projection at 422,000 jobs. The Geographic Solutions forecast was derived from internal data on the number of job searchers, job severances, and applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).

The unemployment rate dropped to 3.9%, below the Geographic Solutions and WSJ forecasts of 4.1%. The unemployment rate forecast used internal data on the number of job openings, job severances, job searchers, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast used unemployment claims data from the USDOL.

Job creation was strongest in Leisure & Hospitality (53,000) and Professional & Business Services (43,000). Construction, Manufacturing, and Trade, Transportation, & Utilities each grew by more than 20,000 jobs for the month. Government employment continues to flounder, falling for the fifth consecutive month. 

Employment figures in all major sectors remain below their February 2020 pre-pandemic levels with the exception of Financial Activities. Leisure & Hospitality which was harmed the most by the pandemic is still more than seven percent below its pre-pandemic jobs.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate declined to 3.9% from the previous month. 

The labor force participation rate maintained its rate of 61.9% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.5% to 7.3%. Declines in the unemployment rates with a growing or steady labor force participation rate indicate that the labor market is shaking off some of the slack experienced in the early fall.

December presented a continuation of the dichotomy between the Business Establishment Survey (CES) and Household Survey CPS). It is not unusual to see light job growth with a declining unemployment rate. However, that is usually a result of discouraged workers dropping out of the labor force. That was not the case as the labor force participation rate was unchanged from last month. A pattern is emerging of many people taking jobs as self-employed, contract, or “gig-economy” workers which do not get counted in the CES. There has been some reporting to back this up. If this trend continues then judging the state of the recovery should rely more on the unemployment rate and the labor force than the number of recorded new payroll jobs each month.  

Even though the last few months of job growth in 2021 were rather disappointing, the overall performance was upbeat for the year with the economy creating 6.4 million jobs when predictions of surveyed economists averaged 6.0 million at the beginning of the year.  The substantial decline in the unemployment rate accompanying an increase in the labor force can give us additional optimism heading into 2022.



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