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US Ends 2021 with Disappointing Job Growth Ahead of Omicron’s Push

The world’s largest economy gained just 199,000 jobs in the last month of the year

Washington:

The U.S. economy ended 2021 on a sour note with a worse-than-expected jobs report on Friday, highlighting the challenges that await President Joe Biden in the New Year as the Omicron variant ramps up and its legislative agenda stagnates.

The world’s largest economy gained just 199,000 jobs in the last month of the year, the Labor Department said, defying expectations of an increase of hundreds of thousands of jobs fueled by the recovery from Covid -19.

However, the unemployment rate fell to 3.9%, not far from what it was before the pandemic, and Biden hailed the report as marking “a historic day for our economic recovery.”

Analysts warn that the days ahead could nonetheless darken as cases of Covid caused by the new wave of variants and complicate daily life again.

“This is all before Omicron, which is making many people sick and disrupting many businesses,” Moody’s Analytics’ Mark Zandi tweeted, noting that the investigation was based on data collected before the recent spike in infections.

“Businesses are improving in their handling of the waves, but the pandemic continues to give the economy the green light.”

The data was Biden’s latest setback after his marquee spending plan called Build Back Better was suspended in Congress due to resistance from a key lawmaker in his Democratic Party.

The Republican opposition in the Senate tweeted that the report marks “another huge failure for Biden’s economy.”

The recent spike in inflation has undermined public support for Biden, but the most powerful actor against him is not the White House but the Federal Reserve.

Analysts say there was enough good news in that report for the independent central bank to move closer to hike in interest rates as early as March, but the expected damage from Omicron could complicate matters.

“In the context of a rapidly deteriorating health situation, the (first quarter) lull in economic activity will force Fed Chairman (Jerome) Powell to walk a tightrope in upcoming political meetings,” said Gregory Daco of Oxford Economics.

The disparities are widening

The United States created an average of 537,000 jobs per month for a total of 6.4 million last year, while the drop in the unemployment rate also brought it closer to the 3.5% level of February 2020, before the collapse of the economy.

A separate Labor Department household survey showed the number of people employed rose by 651,000 in December, a sign the report may have been stronger than the title suggests.

“Last year ended with fewer new jobs created than expected, but the payroll figure really shouldn’t be the center of attention,” said economist Joel Naroff.

“Availability of labor is the problem facing businesses and which continues to disappear.”

The government also revised upward job gains for October and November, saying they were 141,000 more combined jobs than previously announced.

But as companies continue to struggle to fill vacancies, the labor force participation rate, a closely watched measure of people working or looking for work, remained unchanged last month at 61.9%. , after spending most of the last year idling.

And disparities between racial groups remained, with the unemployment rate for African Americans increasing 0.6 percentage points to 7.1%, while the rate for white Americans declined.

Increase wages

Biden was successful in pushing through two major spending bills last year to tackle the pandemic and modernize the country’s infrastructure, but has been less successful in stemming the tide of price increases.

Economists debate the factors responsible for inflation, including the role played by wages. Employment data showed that the average hourly wage increased 4.7% from 2021, not far from the rate of inflation.

The Fed has already signaled that it is ready to hike rates, potentially up to three times in 2022, which could contain the price spike.

The report “won’t trigger any change in the Fed’s stance, but it does make us more confident in our forecast that the first rate hike will come in March,” said Ian Shepherdson of Pantheon Macroeconomics.

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