The unemployment rate in the United States decreased to 3.9% in December. According to a report, this is a pandemic low as employers added 199,000 new jobs, which is a sign that they’re having difficulty filling positions as the majority of Americans do not want to go back to work.
The decline from 4.2% in November was a sign that more people were able to find work in December. 651,000 more people reported they were employed in December, compared to November.
However, the figures released last Friday by the Labor Department reflected the situation of the labor market in early December, just before the soaring number of COVID-19-related infections started to affect the economy. Economic experts have warned that the pace of job growth could slow in January and February due to omicron-related cases that have caused millions of newly infected workers to stay at home and be quarantined.
The economy is about 3.6 million jobs below the pre-pandemic levels.
At present, steady employment is caused by strong demand from consumers which has been resilient despite the constant shortage of supply. The growth in consumer spending and the purchase of equipment will likely push the economy towards a strong annual growth rate of about 7% in the last quarter of 2021.
Americans‘ economic outlook grew little in December, as per the Conference Board, suggesting that spending was likely to be healthy during the majority of December.
Also, wages jumped dramatically during December with the average hourly wages rising 4.7% compared to the same time last year. The increase in wages is an indication that businesses are fighting hard for the vacant positions. The record-breaking number of people quitting because of the need to look for better jobs and better pay, is fueling increases in pay.
Rapid increases in wages and low unemployment, however, can further increase price inflation, as firms increase their prices to pay for the rising costs of labor.
Prices have already increased to a four-decade record which has prompted a dramatic shift by the Federal Reserve, from keeping rates at a low level to help with hiring, to focusing on raising rates of interest to fight inflation.
The majority of economists expect the Fed to increase its benchmark rate for short-term interest, which is currently set to zero, in March, and to raise rates several times this year.