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Employment Finishes Strong in 2021

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Payroll employment is expected to rise by 410,000 jobs in December after being revised up for the month of November. Private sector payrolls are expected to account for 375,000 of those gains. Public sector payrolls are expected to rise by 35,000 jobs, largely in education. Local public schools remained grossly understaffed and have lost teachers since the start of the school year in September.

Travel and tourism picked up last month, which suggests a pickup in hiring for leisure and hospitality. Omicron did not start to close theaters and delay sporting events until later in the month. Walk-ins and seated table reservations softened during the last week in December when many New Year celebrations were canceled. That is two weeks after the survey week for December, so the shift won’t show up until the January report.

Average hourly earnings are expected to rise by 0.4% from November and 4.2% from a year ago in December. Large online retailers are creating a floor for wages and beating many small and midsize firms in the competition for workers. That includes manufacturers whose business models are being challenged by acute labor shortages. Wage gains are becoming more broad-based.

The pandemic has accelerated the concentration of employment at large firms. Job postings were driven by small firms in November, but large firms dominated actual hires.

Separately, the unemployment rate is expected to drop to 4.1%, a new pandemic low. Participation in the labor force is expected to edge up another one-tenth of one percent to 61.9% as more women and older retirees return to the labor force.

The gains in labor force participation are expected to be short-lived. Everything from fear of contagion to increased child care responsibilities and illness is expected to take a toll on participation as the Omicron wave gains momentum.

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