The U.S. Bureau of Labor Statistics reported that the unemployment rate declined to 3.9 percent in December 2021, compared to 4.2 percent in November. According to Statistics Canada, the unemployment rate in Canada fell to a new pandemic-low of 5.9 percent in December 2021 from 6 percent in November. Of course, this has governments in both countries touting their apparent economic policy success. However, there are a number of important factors to consider especially given the impact of COVID-19 on the labour force participation, notably in certain sectors of the economy. When these dynamics are factored in, there is not a whole lot of good news to shout about.
The first is the decline in the participation rate, that is to say those who are actually looking for work. For example, in the U.S., the labour force participation rate was unchanged at 61.9 percent in December but remains 1.5 percentage points lower than in February 2020, largely because of the pandemic’s impact. Many workers are choosing to stay out of the labour market due to health and safety concerns and business closures, more so today with the more contagious Omicron variant. With fewer people actually seeking employment, this automatically helps to lower the unemployment rate.
In both countries, the jobless rates particularly show a disparity among certain groupings. For example, in the U.S., the jobless rates for teenagers (10.9 percent), Blacks (7.1 percent), Asians (3.8 percent), and Hispanics (4.9 percent) showed little or no change over the month of December. In many cases, this is a reflection of the fact that certain minority groups and youth tend to work in low paying jobs in the leisure and hospitality sectors, many in small businesses that were closed or restricted due to lockdowns. Employment in food services and drinking places has been particularly affected over the course of the pandemic.
In December, millions of persons reported that they had been unable to work because their employer was closed or lost business due to the pandemic — that is: they did not work at all, were prevented from looking for work, or worked fewer hours at some point in the four weeks preceding the survey, often due to the pandemic. To be counted as unemployed, by definition, individuals must be either actively looking for work or on temporary layoff.
Another factor has been the difficulty in finding full-time work for economic reasons and the pandemic. Instead workers have been forced often to rely on part-time employment. These individuals, who would have preferred full-time employment, were working part-time because their hours had been reduced or they were unable to find full-time jobs. Some have had to rely on government assistance in order to survive over the last year and a half. Unfortunately, some of these assistance programs have gradually been terminated in some jurisdictions, forcing many people to rely on food banks, friends and family for assistance.
What is most intriguing is the fact that despite a large number of jobs going unfilled, it appears that many employers are actually facing a labour shortage. As their businesses reopen, this has forced employers to offer better wages and working conditions in order to attract previous or new workers. According to the Bureau of Labor Statistics, over the past 12 months, average hourly earnings have increased by 4.7 percent. It will also be interesting to see how employers will deal with the more immediate problem of loosing workers due to the Omicron variant. This of course is a major concern in the health care sector, but should hopefully be a temporary problem. This situation shouldn’t have any major impact on the overall unemployment rate, but could influence labour participation rates should the affected workers permanently withdraw their services from the labour market (e.g. retirement).
All in all, one can see that the lower unemployment rates don’t necessarily reflect detrimental aspects of the current labour market situation, especially as they pertain to certain sectors and certain members of the labour force.
FROLITICKS 
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