Economic Forecasts

Jobs: Another Big Drop in the Unemployment Rate

Kiplinger’s latest forecast on jobs

Kiplinger's Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information.

If you already subscribe to the print edition of the Letter, click here to add e-mail delivery and the digital edition at no extra cost.

A big drop in the unemployment rate in December, to 3.9%, suggests that businesses will continue to have difficulties hiring this coming year. This follows a similar drop in November. While the jobless rate is likely to jump up in January because of the surge in omicron infections, the labor market should stay tight for most of the rest of the year. The labor force remains smaller than what it was prior to the pandemic, as many workers either took early retirement or delayed their reentry into the job market because of trouble finding child care or because of infection fears. A tight labor market will mean more job openings taking longer to fill, and higher-than-normal wage increases.

199,000 jobs were added to December payrolls, a drop from 249,000 in November, but December’s gains were still spread across most sectors of the economy. Nursing homes and child care facilities are still seeing declines. Restaurant hiring is still low, likely because of slower demand as a result of the infection surge.

Wages increased 5.8% from a year ago for production workers. The number of part-time workers looking for full-time work is declining as more of them become full-time, and more people are joining the labor force to look for work. 

The labor force participation rate stayed at 61.9%, which is still much below the 63.3% prepandemic rate. The number of unemployed people who were prevented from looking for work because of the pandemic was 1.1 million, down from 1.2 million in November. The share of teleworking employees was 11.1%, down from 11.3% in November.

The drop in the unemployment rate should set the stage for the Federal Reserve to raise short-term interest rates this year. Fed Chair Jerome Powell has hinted that the Fed is worried about inflation and intends to do more to combat it. Expect the Fed to raise rates four times this year, with the first hike coming in March.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022

Recommended

Kiplinger's Economic Outlooks
Economic Forecasts

Kiplinger's Economic Outlooks

Regularly updated insights on the economy’s next moves.
January 14, 2022
The Kiplinger Letter’s Top 10 Forecasts for 2022
Economic Forecasts

The Kiplinger Letter’s Top 10 Forecasts for 2022

What to expect from the U.S. economy and an election-year Congress, as well as the outlook for cryptocurrency regulations, TikTok and more. Plus, we g…
January 13, 2022
Homebuilder Stocks Get a Pandemic Boost
Becoming an Investor

Homebuilder Stocks Get a Pandemic Boost

As COVID shifts to an endemic, housing stocks could get a lift should Americans move to homes with more space and amenities.
December 20, 2021
Stick With Your Plan
Financial Planning

Stick With Your Plan

Timing the market is nearly impossible. The worst thing you can do is sell stocks when prices are tumbling.
December 17, 2021