Special factors in play for December’s US employment report
By Terry Sheehan, Econoday economist
January 6, 2022
Some things to keep in mind for the December employment report, to be released Friday, January 7 at 8:30 ET. Econoday’s consensus is calling for a robust 400,000 gain in nonfarm payrolls which would nearly double November’s 210,000 rise.
First: The explosion of hiring in private payrolls reported in the ADP’s national employment report for December should be read cautiously. Up 807,000 for the total is huge. And the ADP number does not move in tandem with that of the Bureau of Labor Statistics and can miss by a wide margin. Nonetheless, it does suggest there was strong hiring in December and notably in areas that tend to pay higher wages and benefits and reflect more stable employment like manufacturing (up 74,000), professional and business services (up 130,000), and education and health (up 85,000). Notable also is the ongoing demand for workers in leisure and hospitality (up 246,000) and trade, transportation, and utilities (up 138,000). ADP’s total could in part have been swollen by seasonal adjustment factors similar to those that could influence the government data.
Second: The December employment report survey period ended on December 18. This makes it a five-week survey period which has been infrequent over the last 10 years, and therefore might impact the seasonal adjustment factors. For example, the longer survey period may capture more December graduates becoming employed and possibly increasing average hourly earnings more than the seasonal factors anticipate.
Third: Also hitting seasonal adjustments is the possibility of atypical layoff activity at year-end. Many businesses are hiring, or at least not reducing payrolls. Note that Challenger data on layoffs have been soft for this time of year and indicate that employers are holding onto current workforces wherever they can. Job cuts now are more about eliminating open spots than reducing payrolls. There’s also a need to take the weather into consideration with many outdoor businesses remaining active into December. In some parts of the country December was warmer than usual, so would allow more new construction and outdoor activities.
Fourth: The BLS reported a net decrease of 7,200 striking workers in the December survey reference period ended December 18. There was one new strike of 3,000 workers at colleges and universities, with ongoing strikes totaling 4,200 workers. One strike of 10,000 workers at John Deere has ended. While the size of December change in payrolls could obscure the impact of the strikes, there should be a roughly equal impact on education workers and for workers in manufacturing.
Fifth: December payrolls have a tendency to come in over expectations (13 times since 2000 vs 7 times below and 1 on expectations), although usually it isn’t a big margin. Forecasters are likely to be cautious in their estimates given the unusual conditions in 2021, but it does suggest that Fed policymakers may see substantial and rapid gains toward maximum employment that will affect the outlook for monetary policy in 2022. This would put a greater bias on removing accommodation.
Sixth: The December report will have revisions for the household survey numbers. Revisions are usually small and don’t change the tone of recent history for things like the unemployment rate or participation rate. The establishment survey will get its annual revisions with the January numbers on Friday, February 4.
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