On the December Jobs Report

Twice in a row now, a big miss for payrolls but a strong household survey. The statistics were gathered before the Omicron case-wave hit, so any effects of that won’t show up till the January report. The unemployment rate made a new post-pandemic low, the first time below 4%. It remains slightly above the pre-pandemic benchmark. More than all the jobs gains in December were whites; employment fell for blacks, Hispanics and Asians, setting back the Fed’s efforts for “inclusive maximum employment.” The January report will likely be weak due to Omicron, and by the March FOMC it would take a very strong February report to undo what will then be three weak reports in a row, which should keep lift-off from the zero funds rate from happening at that meeting. Once Powell’s Senate confirmation hearing next week is done, we think he will soften what now seems to be a very hard anti-inflation stance, which he is adopting only as a political fig leaf to conceal culpability in excessive and distortive fiscal stimulus.