The U.S. added 199,000 jobs in December as employers struggled to find workers.

The gain was the weakest of the year, but not for lack of demand: The unemployment rate fell to 3.9 percent and wages increased.

-20

-15

-10

-5 mil.

April

June

Sept.

Jan. ’21

April

-3.6 million jobs since Feb. 2020

+18.8 million since April 2020

+199,000
in December

152.5 million jobs in February 2020

America’s hiring slowdown continued last month, with employers struggling to fill jobs as many workers remained on the sidelines.

Employers added 199,000 jobs in December, the Labor Department said Friday, the smallest monthly gain of the year. The deceleration began in November, when 249,000 jobs were added.

The unemployment rate fell to 3.9 percent, from 4.2 percent.

Paired with strong wage growth — average hourly earnings climbed by 4.7 percent over the year, more than the 4.2 percent that economists in a Bloomberg survey expected — the swift decline in the jobless rate seems to suggest that a dearth of available workers may be, in part, what is holding hiring back.

“The unemployment rate is a reliable barometer, and it’s going down fast,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives. “It does speak to not having enough labor supply to meet demand — not faltering demand.”

The falloff in hiring came at the end of a year in which the economy added 537,000 jobs per month on average, and more than 6.4 million jobs overall.

The data released on Friday was collected in mid-December, before the pandemic’s latest wave. Since then, the Omicron variant has ignited a steep rise in new coronavirus cases, driving up hospitalizations, keeping people home from work and prompting fresh uncertainty among employers. Economists are bracing for the surge in cases to further disrupt job growth in January and in the coming months, though it is too soon to say how it will affect the labor market in the longer term.

“I think Omicron will slow hiring in January,” said Nela Richardson, chief economist at the payroll processing firm ADP, said before the report. “It might hit in early February as well.”

The seesawing employment situation underscores the economy’s continued susceptibility to the pandemic, nearly two years on. Although the labor market has brightened, some industries with face-to-face interactions, notably leisure and hospitality, remain extraordinarily vulnerable to case levels.

-1 mil.

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April

Jan. ’21

+53,000
in December

16.9 million jobs in Feb. 2020

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April

Jan. ’21

+22,000

7.6 million

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April

Jan. ’21

-2,100

15.6 million

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April

Jan. ’21

+26,000

12.8 million

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April

Jan. ’21

+43,000

21.5 million

-2

-1 mil.

April

Jan. ’21

+10,000

24.6 million

Restaurants, hotels and other hospitality businesses managed to hire at a steady pace in December — adding 53,000 workers — but other industries struggled to hire. The number of hospital workers actually dropped in December, the report showed, even as those businesses were reported to be scrambling to add nurses and doctors.

The figures may also have been affected by seasonal patterns: Jobs data is adjusted for typical monthly patterns that have been thrown out of whack by the pandemic.

The slowdown could get worse before it gets better, as Omicron cases surge. Many businesses have postponed return-to-office plans, some indefinitely. Restaurants and theaters have increasingly gone dark amid staff shortages and renewed fears of infection. Some schools have returned to remote learning, or are threatening to, leaving many working parents in limbo.

“We’re all sort of at the whims of these variants and surges in cases, and it’s hard to know when they might strike,” said Nick Bunker, director of economic research at the Indeed Hiring Lab. “Any sort of projections or outlook on the pace of gains over the next year or so is still dependent on the virus.”

Employment levels remain depressed compared with the period before the pandemic, even as job openings remain remarkably high by historical standards. The economy has added 18.8 million jobs since April 2020 — when pandemic-related lockdowns were at their worst — but is still down 3.6 million positions compared with February 2020.

74

76

78

80

82

84%

Jan. ’19

Jan. ’20

Jan. ’21

10

20

30

40

50%

Jan. ’20

Jan. ’21

Some of those workers may have retired. Others may be waiting to come back when health risks from the virus are less pronounced, or may be struggling to find child care amid regular school shutdowns.

Still, there is plenty of evidence of momentum underlying the uneven economic recovery. A record number of Americans quit their jobs in November, as intense competition, especially in lower-wage sectors, has presented workers with opportunities to demand and seek higher wages and better working conditions.

“We’ve seen these subsequent waves,” Mr. Bunker said. “And then things have reverted to the underlying strength.”

Economic policymakers at the Federal Reserve are aware that many workers are still missing from the labor force, but they have increasingly signaled that they will not wait for workers to return to remove help for the economy. With wages rising and inflation at its highest in nearly 40 years, officials are trying to make sure that prices remain under control.

The figures released on Friday will probably confirm to them that the economy is closing on their full employment goal.

“A lot of the focus at the Fed will be on the lower unemployment rate,” said Gennadiy Goldberg, senior rates strategist at TD Securities, noting that markets actually increased their expectations of rate increases in 2022 after the data release.

Officials have signaled that they could raise interest rates several times this year in a bid to slow spending and cool off a fast-growing economy, and economists think those moves could start as soon as this spring. For now, Fed policymakers seem content to define “full employment” — their job-market goal — as low joblessness.

“I don’t think it’s a matter of some internal conflict between hiking and full employment,” said Michael Feroli, chief U.S. economist at J.P. Morgan. When it comes to declaring victory on job-market progress, he said, “most of them are already there.”

Industry (From top to bottom)

Leisure and hospitality

Retail

Business services

Education and health care

Manufacturing

Construction

+5

+10

+15

+20%

2019

2020

2021

All industries

All industries

Leisure and hospitality

Leisure and hospitality

Manufacturing

Manufacturing

Education and health care

Education and health care

Construction

Construction

Retail

Retail

Business services

Business services

Strong wage growth — and an uptick in the share of people who are working or looking for a job — provided an optimistic undertone to a jobs report that showed a slowdown in hiring at the end of the year.

That is good news for President Biden and his administration, which has been trying to capitalize on strong economic growth and a swiftly healing labor market as rising prices have shaken the public’s confidence in the economy.

Average hourly earnings climbed by 0.6 percent in December from the prior month, and had surged by 4.7 percent over the past year. Both of those numbers are much stronger than what economists in a Bloomberg survey had projected.

“Wages are just skyrocketing,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “This is a hot labor market.”

The pop in pay came as employers scrambled to hire workers. The share of people in the labor force applying for jobs — the official unemployment rate — dropped to 3.9 percent last month, at a time when job openings are elevated.

The plentiful opportunities and the chance for fatter paychecks have lured some people back into the job market. Among civilians 16 or older, the share working or looking for employment rose to 61.9 percent in November and December, the highest rate since the pandemic started.

Participation in the labor force remains depressed compared with its February 2020 level — 63.4 percent — but the combination of rapidly declining joblessness and briskly increasing wages has prompted many economic policymakers to declare that the economy is at or near “full employment,” a situation in which everyone who wants a job and is available to work can find one.

The job market has returned to that milestone much more quickly than economists had expected, which is a point of pride for the White House.

Brian Deese, the director of the White House National Economic Council, wrote on Twitter that 3.9 percent — the December jobless rate — is “a simple number” but “behind it are millions of American workers and families” whose “lives are better because of the historically strong economic recovery in 2021.”

Economic officials in the Biden administration and at the Federal Reserve have also emphasized rapid wage growth in recent months. Fed officials care about the quickly rising pay not just because it signals that employers are competing for workers, but also because it threatens to keep prices rising as businesses try to cover their climbing labor costs.

Economists said the latest report — and especially the wage data — increased the chances that the Fed might need to raise interest rates quickly to cool off the economy this year. And they said it affirmed that the economy was “at or near” full employment even with millions of jobs and workers still missing compared to before the pandemic.

“We’ve never seen anything like the job market we’re seeing today,” Ms. Swonk said. “It is stunning.”

The jobless rate fell to 3.9 percent in December, based on data collected during a period that largely predated the worst of America’s Omicron-driven virus surge.Credit…Gabby Jones for The New York Times

New data showing that the unemployment rate is falling and wages are rising is expected to cement — and maybe even hasten — the Federal Reserve’s plan to begin raising interest rates this year as it tries to put a lid on high inflation.

The jobless rate fell to 3.9 percent in December, based on data collected during a period that largely predated the worst of the Omicron-driven virus surge.

Unemployment peaked at 14.8 percent in April 2020, and had hovered around 3.5 percent for months before the onset of the pandemic. The fact that it is returning so rapidly to near-normal levels has caused many central bankers to determine that the United States is nearing what they estimate to be “full employment,” even though millions of former employees have yet to return to the job market.

“This affirms the Fed’s conclusion,” Diane Swonk, chief economist at Grant Thornton, said following the report. “This is a hot labor market.”

Signs abound that jobs are plentiful but workers are hard to find: Job openings are at elevated levels, and the share of people quitting their jobs just touched a record. Employers complain they are struggling to hire, and a shortfall of workers has caused many businesses to curtail hours or services.

As a result, employers have begun to pay more to retain their employees and lure in new applicants. Average hourly earnings climbed 4.7 percent in the year through December, faster than economists in a Bloomberg survey had expected and much more quickly that the typical pace of progress before the pandemic, which oscillated around 3 percent.

Those quick pay gains are a signal to Fed officials that people who want jobs and are available to work are generally able to find it — that the job market is what economists call “tight” and would-be workers are relatively scarce — and that wages might begin to feed into prices. When companies pay more, they may also charge their customers more to cover their costs.

Some Fed officials are worried that rising wages and limited production could help sustain elevated inflation — now near a 40-year high. The combination of a healing job market and the threat of out-of-control inflation has prompted central bankers to speed up their plans to withdraw policy help from the economy.

Fed officials are already slowing the big bond purchases they had been using to support the economy. In addition to that, they could raise rates three times in 2022, based on their estimates, and economists think those increases could begin as soon as March. That would make borrowing for cars, houses and business expansions more expensive, slowing spending, hiring and growth.

“It makes sense to get going sooner rather than later,” James Bullard, president of the Federal Reserve Bank of St. Louis, said during a call with reporters on Thursday, suggesting that the moves could come very soon. “I think March would be a definite possibility.”

And officials have signaled that once rate increases start, they could promptly begin to shrink their balance sheet — where they hold the bonds they have purchased to stoke growth throughout the pandemic downturn. Doing that would help to lift longer-term interest rates, reinforcing rate increases and helping to further slow lending and spending.

Economists speculated following the jobs report that the new figures made an imminent rate increase even more likely, and that the central bank might even be prodded to remove its economic support more quickly as wages take off.

“We think that today’s report adds to the case for the Fed to kick off its hiking cycle in March,” researchers at Bank of America wrote following the release of the data. “The economy appears to be operating below maximum employment and inflation remains sticky-high.”

Krishna Guha, an economist at Evercore ISI, argued that the combination of rapidly declining unemployment and heady wages might even prompt central bankers to increase interest rates faster than once every three months — the fastest pace they increased in their last set of interest rate increases, which took place from 2015 to 2018.

“The Fed might end up having to hike at a pace faster than the baseline one hike per quarter,” Mr. Guha wrote.

Investors will get a chance to hear from key Fed officials themselves next week. Jerome H. Powell, whom President Biden has renominated as Fed chair, has a confirmation hearing on Tuesday before the Senate Banking Committee. Lael Brainard, now a governor and Mr. Biden’s pick to be vice chair, has a hearing on Thursday.

Both are likely to emphasize the unevenness of the recovery and acknowledge that millions of workers remain out of the job market thanks to caregiving responsibilities, virus fears and other pandemic barriers, as they have throughout the downturn.

They will probably also note that overall hiring slowed in December: Employers added 199,000 jobs, the weakest performance all year, as they struggled to find workers. And Omicron poses a risk of further retrenchment, because the November data came before the recent surge in virus cases that has kept restaurant diners at bay and shut down live performances.

But at the end of the day, it is the falling jobless rate that is likely to remain in focus for the Fed as it contemplates its next steps, economists think.

“A March rate hike seems pretty likely at this stage,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives. Asked if there was one overarching takeaway from the new data, she said: “It’s just a tightening labor market. That’s it.”

Wall Street was unsteady on Friday, after a new report showed that hiring in December was weakening even before the latest wave of the coronavirus reached its full strength.

U.S. employers added 199,000 jobs in December, the Labor Department said on Friday, far below economists’ expectations for a gain of 440,000 jobs. It was the job market’s weakest monthly showing in 2021, and followed an unexpected slowdown in hiring in November as well.

The reaction on Wall Street was muted, however. The S&P 500 fell about 0.3 percent in early trading, adding to its losses for the week. The Nasdaq composite was also lower.

Yields on government bonds continued to climb, as they have done all week. The yield on 10-year Treasury notes rose to 1.75 percent from 1.73 percent.

Investors have become laser focused this week on the Federal Reserve’s next move, as the central bank quickly removes support for the economy to tamp down inflation. Fed members are closely watching the labor market, with some officials saying that work force conditions may already be consistent with maximum employment, minutes from the central bank’s meeting in December showed.

At the same time, however, the data for the latest job report was collected in mid-December, before the Omicron variant was in full swing in the United States, and only captures part of the variant’s impact on the economy. Rising infections wreaked havoc on companies after staff shortages worsened by the end of the year.

Engineers working on a natural gas pipeline in Hungary. Rising energy prices have pushed the eurozone’s inflation rate higher. Credit…Bela Szandelszky/Associated Press

Inflation in the eurozone climbed to an annual rate of 5 percent in December, the second-consecutive record, according to the initial estimate of the European Union’s statistics office.

The rate was slightly higher than the previous month’s increase of 4.9 percent. Inflation has jumped around the world as the pandemic disrupted supply chains, labor markets and the availability of goods. In Europe especially, soaring energy prices have contributed significantly to the record-high inflation rates.

But analysts say there are small signs inflation is turning a corner. In December, energy prices rose 26 percent compared with a year earlier, one-and-a-half percentage points smaller than November’s increase.

Still, energy prices are set to remain volatile this winter amid dwindling stockpiles of natural gas and concerns about supply from Russia. Around the New Year, European gas prices fell sharply but then jumped 30 percent on Tuesday. They remain several times higher than normal prices.

The European Central Bank expects energy prices to stabilize throughout the year and supply bottlenecks to ease, allowing inflation to eventually fall back. European policymakers have argued that because most of the jump in inflation will be temporary, they do not need to respond aggressively by raising interest rates or ending all the bank’s bond-buying programs.

But Europeans will still have to withstand a relatively long period of higher prices. Once energy prices are stripped out, December’s inflation rate rose 2.8 percent from a year earlier, as the prices of food and industrial goods increased. The central bank forecasts the overall inflation rate, including energy, to average 3.2 percent this year, notably above its 2 percent target.

According to some analysts, the eurozone may have reached the peak in inflation.

“In the near term, eurozone inflation is set to decline,” Salomon Fiedler, an economist at Berenberg bank wrote in a note to clients. For one, the effects of changes to German sales taxes at the start of the pandemic will no longer impact inflation, reducing the overall rate by about half a percentage point.

There are “tentative signs” that some of the key drivers of the recent increase in inflation are reversing, Claus Vistesen, an economist at Pantheon Macroeconomics, wrote in a note.

“If we are right, markets, and the E.C.B., will breathe a sigh of relief, but we think it will be short-lived,” he wrote. “Energy inflation will come down only slowly, and with food inflation now seemingly on the rise, the headline will remain high overall through most of this year.”

The argument before the Supreme Court boils down to whether the federal government has the authority to impose vaccine mandates.Credit…Brendan Mcdermid/Reuters

The Supreme Court are hearing oral arguments over efforts to overturn two major Biden administration policies intended to raise coronavirus vaccination rates: its vaccine-or-testing mandate aimed at large employers and a vaccination requirement for some health care workers.

The hearing on Friday comes as the country is facing a surge in coronavirus cases and the White House wrestles with how to manage this phase of the pandemic. It could be the “most important day for public health in a century,” said Lawrence Gostin, a professor of global health law at Georgetown.

The argument boils down to whether the federal government has the authority to impose these mandates, a question the Supreme Court has not yet considered in other challenges:

The Labor Department’s Occupational Safety and Health Administration says it has the power via a 1970 law that allows it to issue emergency rules for workplace safety.

Opponents, which include some states, trade groups and companies, say that the mandates should be left to legislation, not executive action.

The outcome is a tough call, labor lawyers say. The court’s conservative majority may be skeptical of broad assertions of executive power, writes The New York Times’s Adam Liptak. The last time the Supreme Court considered a Biden administration policy addressing the pandemic — a moratorium on evictions — the justices shut it down.

A decision in favor of the mandate would mean that, by Monday, large companies must have policies in place that require employees to be vaccinated or tested weekly. They must be following those policies by Feb. 9.

If the court rules against the government, then that would effectively end the federal mandate, though the administration could pursue the regular rule-making process. This also wouldn’t preclude states from introducing their own vaccine requirements.

The special hearing was called late last month, and the court said it would move quickly (as it did in a recent case over abortion rights in Texas). A ruling could come fast.

In the meantime,many companies have been gearing up for a mandate, if they haven’t already introduced such rules.

Starbucks recently said that U.S. workers would have to be fully vaccinated by Feb. 9 or submit to weekly testing, in compliance with the mandate.

JPMorgan Chase warned employees that “government-issued vaccine mandates may likely make it difficult or impossible for us to continue to employ unvaccinated employees,” and encouraged workers to get vaccinated.

Macy’s requested the vaccination status of its employees, often a prelude to a mandate.

Several airlines, including Lufthansa, have said they would like to cancel more of their fights because they are not booked fully enough to be profitable.Credit…Daniel Roland/Agence France-Presse — Getty Images

Airlines are at odds with the European Union over rules that require them to use their takeoff and landing slots at airports, even when they don’t have enough passengers to justify flights. Airlines are being forced to fly thousands of nearly empty planes — sometimes called “ghost flights” — as travel plummets because of Omicron infections.

In recent weeks, several European carriers, including Lufthansa and Brussels Airlines, have said they need to cancel thousands of fights because they are not booked enough to be profitable. But they are being squeezed by E.U. rules that require them to use their valuable airport slots or risk losing them, potentially to rival carriers.

The rules, which normally require airlines to use at least 80 percent of their allocated slots at airports, were waived in early 2020 as the coronavirus hit the continent. But since then, the bloc has begun reinstating them, and last month the European Commission set the threshold to 50 percent for the winter travel season.

“Now the threshold for maintaining slots is raised again and this means that if we cancel these 3,000 flights, we would lose our slots at multiple airports,” Maaike Andries, a spokeswoman for Brussels Airlines, said Thursday. “This is something that any airline must avoid of course.”

Pre-assigned takeoff and landing slots are common at Europe’s crowded airports, and are used to allocate space and prevent chaos among different airlines.

In the United States, only three airports maintain slots — Kennedy and La Guardia in New York, and Ronald Reagan in Washington — and the Federal Aviation Administration waived them early on in the pandemic and most recently extended them through March of this year.

In announcing its decision to set the restriction at 50 percent capacity on Dec. 15, Adina Valean, the E.U. commissioner for transport, acknowledged concerns about the Omicron variant, but said the move was aimed at helping airlines return to capacity by the summer.

But as more people canceled trips over the holidays amid the surge in the virus, airlines were left with little choice but to fly near-empty planes or risk losing valuable airport slots.

Carsten Spohr, chief executive of the Lufthansa Group, said his company had to cancel 33,000 flights, roughly 10 percent of those scheduled for the winter season. Other flights took off, but were nowhere near fully booked. Besides Lufthansa, the company owns Eurowings and Austrian, Brussels and Swiss airlines.

“We have to carry out 18,000 additional, unnecessary flights just to secure our starting and landing rights,” Mr. Spohr told the Frankfurter Allgemeine Sonntagszeitung weekly newspaper two weeks ago.

“This is damaging for the climate,” he said, “and is exactly the opposite of what the European Commission hopes to achieve” in its effort to cut greenhouse gas emissions.

Georges Gilkinet, the Belgian minister for transportation, said on Wednesday that he sent a letter to the European Commission asking for a further loosening of the regulation that he called “economic, ecologic and socially nonsense.”

“I asked the Commission to review these unsuitable rules in times of Covid,” Mr. Gilkinet said over Twitter.

This week, the commission said it was standing by its decision to leave slot usage at 50 percent through the winter season, in the interest of balancing the needs of airport operators, passengers and airlines.

That position was supported by a group representing airports.

“The pandemic has hit us all hard. Balancing commercial viability alongside the need to retain essential connectivity and protect against anti-competitive consequences is a delicate task,” said Olivier Jankovec, director of Airports Council International Europe. “We believe that the European Commission has got this right.”

An amended financial disclosure showed that Richard H. Clarida sold shares when financial markets were plunging amid fears of the coronavirus.Credit…Jonathan Crosby/Reuters

Richard H. Clarida, the departing vice chair of the Federal Reserve, bought and sold shares of a stock investment fund in early 2020 just as the Fed was preparing to swoop in and rescue markets amid the unfolding pandemic.

Mr. Clarida failed to initially disclose all of the financial transactions, Jeanna Smialek reports for The New York Times, citing an amended financial disclosure that shows the trading was more extensive than earlier known.

Mr. Clarida previously came under fire for buying shares on Feb. 27 in an investment fund that holds stocks — one day before the Fed chair, Jerome H. Powell, announced that the central bank stood ready to help the economy as the pandemic set in. The transaction drew an outcry from lawmakers and watchdog groups because it put Mr. Clarida in a position to benefit as the Fed restored market confidence.

The recently amended financial disclosure showed that the vice chair sold that same stock fundon Feb. 24, at a moment when financial markets were plunging amid fears of the virus.

The Fedinitially described the Feb. 27 transaction as a previously planned move by Mr. Clarida away from bonds and into stocks, the type of “rebalancing” investors often do when they want to take on more risk and earn higher returns over time. But the rapid move out of stocks and then back in makes it look less like a planned, long-term financial maneuver and more like a response to market conditions. READ MORE

Google infringed on audio technology patents held by the speaker manufacturer Sonos and it is not allowed to import products that violate Sonos’s intellectual property into the United States, a trade court ruled on Thursday. The United States International Trade Commission, a quasi-judicial body that decides trade cases and can block the import of goods that violate patents, issued its final ruling on Thursday, closing a two-year investigation into the intellectual property dispute.

Facebook’s parent company, Meta Platforms, has been sued over the 2020 killing of a federal security guard, a move that aims to challenge a federal statute that shields websites and social media platforms from liability for what users post. The lawsuit, filed on Wednesday by Angela Underwood Jacobs, the guard’s sister, argued that Facebook was responsible for connecting individuals who sought to harm law enforcement officers and sow civil discord. Ms. Jacobs’s brother, Dave Patrick Underwood, who served at a federal building and courthouse in Oakland, Calif., was shot and killed in May 2020 by an Air Force sergeant with antigovernment ties, according to the F.B.I.

The New York Times Company has reached an agreement to buy The Athletic, the online sports news outlet with 1.2 million subscriptions, in an all-cash deal valued at $550 million. The deal brings The Times, which has more than eight million total subscriptions, quickly closer to its goal of having 10 million subscriptions by 2025, while also offering its audience more in-depth coverage of the more than 200 professional teams in North America, Britain and Europe that are closely followed by The Athletic’s journalists.

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