Saturday, January 8, 2022

"Disappointing" jobs report still good, and ends a great 2021.

Yet again, Friday's jobs report was immediately spun as a disappointment.

Left out of that headline, the unemployment rate fell from 4.2% to 3.9%, continuing an impressive drop that happened throughout 2021. I'll get back to that point, but I want to discuss the payrolls side.

I still see quite a few bright spots in this report. Especially in Manufacturing (+26,000), which continued its strong comeback in 2021, with its 8th straight month of gains. Nearly 350,000 manufacturing jobs were gained in 2021, the most in any year since 1994, and a stark contrast to the pre-COVID period, when we actually LOST jobs in this sector from the start of 2019 to February 2020.

Construction also seems to have recovered from its Summer lull, with another 22,000 seasonally adjusted jobs added in December, and that sector is now within 100,000 jobs of its pre-COVID peak.

And those trying to claim that December is a sign of some slowdown should note that (like so many other months in 2021) previous reports had their gains revised upward.
The change in total nonfarm payroll employment for October was revised up by 102,000, from +546,000 to +648,000, and the change for November was revised up by 39,000, from +210,000 to +249,000. With these revisions, employment in October and November combined is 141,000 higher than previously reported.
So put that together with the December number, and that's 340,000 more jobs than we originally thought. Pretty good in a time of such low unemployment.

Wage growth reflected the tight labor market and a record number of quits in November, with a big jump in wages for December.
In December, average hourly earnings for all employees on private nonfarm payrolls increased by 19 cents to $31.31. Over the past 12 months, average hourly earnings have increased by 4.7 percent. In December, average hourly earnings of private-sector production and nonsupervisory employees rose by 18 cents to $26.61.
The BLS also updated the unemployment figures over each of the last 12 months, and while the overall months didn't change too much, it's worth noting that the unemployment rate in this country dropped from 6.7% at the end of 2020 to 3.9% at the end of 2021, basically putting us back to where we were in 2018 and 2019.

But a big difference is that in 2018, if we gained 200,000 jobs in a time of near-full employment after another type of deficit-growing stimulus (the GOP Tax Scam), it was considered a great accomplishment.

Maybe it's the Wall Street "expert" prognosticators that don't know what they're talking about. These guys end up consistently wrong, which skews the news reports on the jobs numbers, and then they stay quiet when those figures are revised up in future months. You'd almost think that there was monkey business going on with these guys.

And let's also note that we've come a long way this year in digging ourselves out of the hole that was created in 2020.

Note that this trajectory matches up with the track the we were on at this point in the recovery from the 1981-82 recession (marked in bright purple). And that's an interesting comparison, because 2021 just beat out 1983 for the largest drop in the US unemployment rate from one December to the next.

Change in December-December unemployment
1982-83 -2.5% (10.8% to 8.3%)
2020-2021 -2.8 (6.7% to 3.9%)

And a lot of that 1982-83 drop was triggered by the Fed's end of '70s-era inflation fear and an end to Reagan's initial austerity. Funny that.

The payrolls and household surveys have been very different in the last few months, with the household survey saying a lot more people are getting jobs than the payrolls survey would indicate. But when you look over the last 12 months, the numbers end up looking pretty similar.

What this jobs report tells me is that stimulus worked in 2020 and 2021 in getting the economy back on track after the initial wreckage from COVID. And that unlike what we saw at this time last year, the resurgence of COVID cases isn't leading to added layoffs and a slowing of economic activity. Granted, this was before omnicron was full force, and we will see what January's numbers hold. But there is no question that 2021 was a great year for the US jobs market, and that we are back near full employment for what we can have at this stage of the pandemic.

Let's tell the truth here. 6% inflation and near-5% wage growth with 3.9% unemployment >>>>> Low inflation, low wage growth, and 6% unemployment. And while some tightening of money is likely needed, keeping unemployment low and demand flowing needs to be the big picture goal as 2022 begins.

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