December Jobs Report: Two Stories and Six Key Negatives

By at 5 January, 2024, 3:21 pm

by Raymond J. Keating –

The latest employment report from the U.S. Bureau of Labor Statistics, once more, offers two stories on the state of the labor market in December 2023. One is a generally positive story, and the second is a big negative.

Too often when talking about the monthly jobs report, various economists, analysts and members of the media will serve up confusing information, for example, highlighting certain data while ignoring other important numbers, and/or confusing or mixing datasets.

So, for clarity’s sake, let’s again review what’s actually in this report.

Each month’s BLS employment report includes data from two surveys. One is the establishment survey, which offers a look at nonfarm payrolls. This survey tends to capture the payrolls picture for more established, larger businesses.

The second is the household survey, which is a more comprehensive look at employment. It better captures startup and small business activity, but also tends to be more volatile from month to month. This also is the survey from which key jobs data are derived, namely, labor force participation and the employment-population ratio.

The number that the media and others in the economics and investment communities tend to focus on is the change in nonfarm payrolls from the establishment survey. For December, payrolls increased by a pretty solid 216,000. That’s the good news.

Meanwhile, all of the key data from the household survey are unequivocally negative. (By the way, revisions to the household numbers were performed, but since these date back to the beginning of 2019, they are not something we need to be concerned with in this look at the most recent data.)

● First, the number of employed plunged by 683,000 in December.

● Second, the civilian labor force declined by 676,000.

● Third, those not in the labor force increased by 845,000.

● Fourth, the labor force participation rate declined from 62.8 percent in November to 62.5 percent in December. That December percentage was the lowest since February 2023. It also compared to the pre-pandemic February 2020 level of 63.3 percent.

● Fifth, the employment-population ration declined from 60.4 percent in November to 60.1 percent in December. That was the lowest percentage since December 2022. It also compared to the pre-pandemic level of 61.1 percent in February 2020.

● Sixth, the only reason that the unemployment rate was unchanged at 3.7 percent in December was because the drop in employment was basically matched by the decline in the labor force.

While the payroll gain was welcome, given the overwhelming negatives from the household survey, this ranks as a rather grim report in terms of the overall jobs picture in December 2023. While hoping for a nice bounce back in January, it also must be recognized that two key datapoints – the labor force participation rate and the employment-population ratio – remain below their pre-pandemic levels.

When we talk about a tight labor market, it’s important to understand that this is largely about a stagnant and aging U.S. population. That speaks to larger problems now and into the future regarding labor costs and diminished entrepreneurship, which in turn, will hit economic and income growth. Indeed, we’re already feeling ill effects.

A serious policy agenda when it comes to the labor market requires reduced governmental costs – such as taxes and regulations – in terms of the incentives for work and hiring, and a welcoming immigration agenda that opens the door to much-needed workers up and down the skills ladder, and to increased entrepreneurship.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.


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