On January 6, the Bureau of Labor Statistics (BLS) issued its report on jobs and unemployment for December of last year. Some parts of that report were surprisingly strong, given that the Federal Reserve has been working for months to push unemployment up and weaken demand for labor.
Five Pieces of Good News
- The official unemployment rate fell two-tenths of a point to 3.5%. That is, historically, quite low. But the official unemployment rate underestimates real unemployment. We can get closer to a realistic rate by including some of the hidden unemployed–in particular, part-timers who want full-time work and people who want jobs but have not searched in a way that meets BLS qualifications for being considered unemployed. However, the BLS has its own amplified unemployment rate that includes the two categories. Adding the two groups to the total unemployed, the BLS alternative unemployment rate was 6.5%. Adding similar groups, but with slightly different criteria, the National Jobs for All Network estimates that total real unemployment reached 8.7% in December of 2022. We think the latter is a better measure of real unemployment, but each number suggests that there is a lot of hidden unemployment.
- In the last six months, the Consumer Price Index has slowed its monthly increases, and in December the index actually fell by 0.1%. Not much, but a welcome change. And real (after-inflation) wages for rank-and-file employees increased about 2% in the last six months. Again, not much but moving in the right direction.
- According to the latest BLS Job Openings and Labor Turnover (JOLT) report, layoffs have not increased as much as we’d expect if we were entering a recession. Tech sector layoffs near the end of last year were highly publicized, but layoffs in general have not accelerated in a significant way. Is it possible that some employers are still concerned about “labor shortages,” and so are cautious about laying off employees? At least from July through November, layoffs were at or just below 1% of the workforce. Hiring rates, too, have been around 4% for the same five months. Thus, as of yet there has been no general increase in layoffs or decrease in hiring.
- Another point from the JOLT report. Remember the Great Resignation that generated so much discussion earlier in the pandemic? Quit rates were very high, reflecting workers’ anger about pandemic issues and long-simmering grievances, as well as confidence that they could find new jobs. Well, quit rates were still high, and that may tell us that on average, workers were not yet overly worried about finding new jobs if they quit the ones they have.
- Finally, from another government publication, we learn that initial claims for unemployment benefits have not shown a rising trend over the last four months.
Five Pieces of Bad News
- Consumers who believed that inflation rates would fall substantially were right. But now they may be getting more pessimistic. Is that because although the overall rate of price increases is falling, prices themselves are not falling? And some are surging. Gas at the pump is down out here in southern California, but it is still high (at least $4 a gallon). Prices on a lot of grocery items seem shockingly high and some–eggs, for example–are heading upward. (The average price of food consumed at home rose just 0.2% in December, but 11.8% over the whole year.)
- As the Fed pushes interest rates up, the cost of financing home purchases is rising. That may explain why hiring rates in the sector fell last year.
- To reiterate an earlier point, we are not close to real full employment. Nor to good jobs with decent compensation for all workers.
- Employment in several sectors, including hotels and restaurants is below pre-pandemic levels. We all know of restaurants that have closed for good and others that are open fewer hours. But some of them still seem to be short of staff and short of experienced workers. One reason must be that average compensation in this industry stinks. Average weekly pay of $445.52 for the whole Leisure and Hospitality industry is the lowest of any sector. Over 52 weeks a year, that’s just $23,167. Understandably, quit rates are the highest of all sectors at 6% of the labor force per month.
- As always, specific demographic groups are suffering from extra-high rates of unemployment. While whites had a 3% official unemployment rate, Blacks had an almost double rate of 5.7%. Persons with a disability saw their unemployment rate fall by almost a point to 5%, but that was considerably higher than the rate of 3.2% for the non-disabled. And while the rate for all teenagers fell to 10.4%, the rate for Black teens increased a third of a percentage point to 17.1%.
There is a long way to go before U.S. employers offer enough good jobs. Some indicators were surprisingly positive in December, but the Federal Reserve has been pushing in the wrong direction, and the new House of Representatives will be doing so too, if Republicans are able to limit federal spending, which has, until now, provided huge support for job preservation and job creation.