Key Unemployment Metric Falls to 50-year Low
December 30, 2021
The U.S. economy added a record number of jobs in 2021, but with the Omicron variant spreading throughout the country, many wonder if the strong labor market recovery will be derailed.
Early indications suggest that, thus far, employers have been able to avoid layoffs. Initial applications for unemployment, a proxy for layoffs, have trended near five-decade lows in recent weeks. The moving average of the last four weeks, which smooths out volatility, has fallen to the lowest level since October 1969.
Still, the labor market’s recovery is expected to slow in the early weeks of the new year as the Omicrant variant continues to spread, especially in the hospitality and leisure industry.
Beyond that, economists expect slower, but still robust job growth in 2022. Economists at Oxford expect U.S. employers to add 5 million jobs next year, meaning a monthly average of more than 400,000. That would be a slowdown from 2021, which saw the economy add an average of 550,000 jobs per month during the year’s first 11 months. Oxford also expects the U.S. unemployment rate to fall to 3.7% by the end of next year. The unemployment rate was 4.2% in November.
Raw job creation numbers and the topline unemployment rate only tell part of the story of the labor force, however. The workforce has nearly 2.5 million fewer workers than before the pandemic, and employers continue to struggle to find workers. The number of available jobs exceeded the number of unemployed workers by 3.6 million in October, the most recent month for which the Labor Department has released figures. Employers have raised wages and offered signing bonuses in an effort to attract workers, which is adding to inflationary pressure.