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WASHINGTON — U.S. employment increased less than expected in December amid worker shortages and job gains could remain moderate in the near term as spiraling COVID-19 infections disrupt economic activity.
Nonfarm payrolls rose by 199,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for November was revised up to show payrolls advancing by 249,000 jobs instead of the previously reported 210,000. The unemployment rate dropped to 3.9% from 4.2% in November, underscoring tightening labor market conditions.
Economists polled by Reuters had forecast payrolls rising by 400,000 and the unemployment rate dipping to 4.1%. Payrolls estimates ranged from as low as 150,000 to as high as 1.1 million jobs. The government revised household survey data, which provides the jobless rate, for the last five years.
Still, the employment report sketched a picture of an economy that closed 2021 on a high note, even if the public health picture is not as improved as officials had hoped.
The below-expectations job gains in December likely reflect labor shortages as well as anomalies with the so-called seasonal adjustment, used by the government to strip out seasonal fluctuations from the data.
The government said on Tuesday that there were 10.6 million job openings at the end of November.
It surveyed businesses and households for last month's employment report in mid-December just as the omicron variant was barreling across the country.
The omicron hit to payrolls is likely to be felt in January.
The United States reported nearly 1 million new coronavirus infections on Monday, the highest daily tally of any country in the world.
Airlines have canceled thousands of flights and some school districts have suspended in-person learning. Some working parents may have to take on childcare duties, with the reversion to online learning.
People who are out sick or in quarantine and do not get paid during the payrolls survey period are counted as unemployed even if they still have a job with their employers.
There have been signs that some unemployed people were stepping back into the labor market following the end of government-funded jobless benefits early in the fall. But the reentry could be slowed by soaring Omicron cases.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, has been slow to improve since falling to multi-decade lows early in the pandemic.
Economists at Goldman Sachs expect participation will remain about half a percentage point below the pre-pandemic demographic trend at the end of the year, with most of the early retirees and some of the younger and middle-aged workers staying out.
The unemployment and participation rates are being closely watched by the Federal Reserve as it prepares to start raising interest rates this year. Minutes of the Fed's Dec. 14-15 policy meeting published on Wednesday showed officials at the U.S. central bank viewed the labor market as "very tight."
Tightening labor market conditions are highlighted by rising wages. Though inflation has outpaced wage gains, many consumers have continued to spend because of massive savings and increased job security, underpinning the economy. Growth last year is expected to have been the best since 1984.