US jobs recovery stalls even as it chalks up record annual employment growth

The US jobs recovery stalled at the end of last year even as official figures confirmed annual record growth in employment numbers.

Closely-watched data from America’s bureau of labour statistics (BLS) showed the world’s biggest economy added 199,000 jobs in December – well short of the 400,000 figure pencilled in by forecasters.

Experts said a shortage of available workers was to blame rather than a lack of openings while January’s figures are likely to present a weaker picture, reflecting the impact of the Omicron variant.

Image: The jobless rate has fallen to near pre-pandemic levels

The figures showed another fall in the unemployment rate, from 4.2% to 3.9%, just above the 3.5% low seen in February 2020 – before the jobless rate surged to 14.7% just two months later as lockdowns took their toll.

They confirmed that 6.4 million jobs were created last year, the highest total since records began in 1939, but that employment numbers are still 3.6 million lower than pre-pandemic levels.

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Officials anxious to prevent a spiral of prices and wages

The US jobs market has been taking longer to recover than the wider economy, with GDP having recovered all the ground lost in the crisis by the middle of last year.

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December’s jobs growth was down from 249,000 in November and compares to an average of more than half a million added per month over the course of 2021.

Annual pay increases slipped back to a still-high 4.7% from 5.1% in November – at a time when high inflation is a concern in the US and officials are likely to be anxious to prevent a spiral of prices and wages.

The US Federal Reserve looks set to start raising interest rates later this year as it rows back the massive programme of support with which it helped stabilise markets and the economy during the coronavirus crisis.

Image: GDP has already bounced back above pre-crisis levels

Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said: “The US labour market may have lost a little momentum at the end of a stellar year, largely due to the lack of available workers rather than available positions, but it is holding up nicely, at least so far.

“January will paint a weaker picture, and the remaining months are in the hands of the latest COVID wave.”

The figures for the latest report were taken from mid-December, ahead of the likely main impact of Omicron.