Thread by @JustinWolfers

December payrolls report shows disappointing job growth of only +199k in December, well below expectations.

Unemployment fell a couple of ticks to 3.9%.

And revisions suggest the past couple of months were a bit better than feared.

Revisions punched November's number up from +210k to +249k, and October up from +546k to +648k. Those upward revisions -- and the prospect that December's number is likely to be revised up -- put a somewhat sunnier glow on these disappointing numbers.

Over the past three months payrolls employment has grown, on average, by +365k per month, which is okay, but not the sort of growth you might hope for.

And the past two months are consistent with a real slowdown in the recovery.

Remember, these are all pre-Omicron data.

So the economy didn't hit what I fear is a severe Omicron shock with any momentum. It dawdled into Omicron, and as you can see all around you, that has since caused all sorts of disruption that'll take months to unwind, even when the surge in cases is behind us.

The household survey provides a more upbeat reading, suggesting that employment grew +651k, which is why the unemployment rate fell to a pretty good 3.9%.

There's something pretty interesting going on in the household survey, which suggests that employment grew by 4.3m in the second half of 2021 (a rate of +727k per month). By contrast, payrolls says we added only 3m jobs (a rate of +508k).

FWIW the latter is usually more reliable

Here's the huge caveat: The "reference period" for the household survey was Dec 5-11. The reference payroll period for the payrolls survey is the pay period including Dec 12. Omicron was barely a factor back then.

We're only learning about our pre-Omicron pre-history.

Where's the economy at?

Well, 3.9% unemployment sounds pretty great. That's partly real, and partly because a lotta people have dropped out of the labor force.

Relative to pre-covid trends, we're still missing about 5-1/2 million jobs. That's a big hole.

https://twitter.com/aaronsojourner/status/1479447236299919369

Or in simpler terms: Employment remains 3-1/2 million below its pre-covid level. Again, a lot. In normal times, losing this many jobs would count as a very serious slump.

https://twitter.com/aaronsojourner/status/1479446678734348292

Average hourly earnings grew by 0.6% last *month*, which is a pretty rapid clip. It's consistent with wage growth starting to accelerate both ahead of inflation and ahead of the Fed's comfort zone.

Annualized wage growth over the past:
3 months: 6.2%
6 months: 5.8%
Year: 4.7%

An interesting snippet... It's easy to *explain* much of *this month's* divergence between the household and firm surveys: They measure slightly different things. But it's less clear which is a better measure of our macroeconomic health.

https://twitter.com/jasonfurman/status/1479448358620209162

Difficult job for the Fed right now.

Doves: Job growth has slowed for the last 2 months, January's Omicron-inflected report will be awful, and none of us know how well we'll bounce back after that.

Hawks: Wage growth is taking off as it would at the start of a wage-price spiral

It's an environment you wouldn't want to tighten into, and an environment you wouldn't want to ease into, and it's not clear the current settings are the right ones.

Good policy will require a lot of hard thinking about how best to respond to supply shocks. And nerves of steel.

Open thread here. Please respond with links to the tweets about today's jobs report which you think need to get more eyeballs. Love to read the snippets, hot takes and insightful graphs you're seeing.