The labor shortage shows no sign of slowing down as job openings ticked up in December

• US job openings gained to 10.9 million in December, according to JOLTS data published Tuesday.
• That landed well above the median economist forecast of 10.3 million openings.

Job openings unexpectedly crept higher in December as the hiring recovery sharply slowed and the Omicron variant fueled a new wave of COVID-19 infections nationwide.

Openings rose to 10.9 million from 10.8 million in the last month of 2021, according to Job Openings and Labor Turnover Survey data published Wednesday by the Bureau of Labor Statistics. Economists surveyed by Bloomberg expected openings to dip to 10.3 million. The print places openings just below the record highs seen in July and erases much of November's decline.

The report all but confirms the labor shortage lasted into 2022 as hiring slowed into the winter. The country added just 199,000 payrolls in December, reflecting the smallest gain all year and badly missing economists' estimates. The weak gains led to little improvement in matching jobs with available workers. There were roughly 0.6 unemployed people for every job opening in December, according to the report. That's the lowest reading in data going back to 2006.

With openings still elevated and employers struggling to hire, the labor market is likely to remain unusually tight well into the new year.

Openings rose the most in the accommodation and food services sector, with businesses listing 133,000 more available roles than in November. Information businesses followed with a gain of 40,000 openings. Nondurable goods manufacturers and public schools both added 31,000 openings.

Retaining workers is a similarly difficult task in the pandemic economy. About 4.3 million people quit their jobs in December, down from 4.5 million the month prior. Though the print signals quitting could be easing from levels seen earlier in 2021, it also marks a sixth straight month of more than 4 million people walking out of their jobs.

The health care and social assistance sector saw the biggest drop in quits of 89,000, according to the report. Quits at accommodation and food services firms fell by 64,000, and the construction sector followed with a drop of 44,000 quits in December.

The extreme labor-market tightness also led to less firing. Layoffs and discharges eased to 1.2 million in December, marking the lowest count in at least 16 years.

The labor shortage enters its second year

Nearly every datapoint in the Tuesday report signals hiring will remain difficult in the coming months. Usually such tightness arrives late in economic cycles when most available workers already have jobs.

Yet the US still has millions of workers on the sidelines, despite the sky-high number of jobs open. The labor force participation rate has staged a sluggish recovery since plummeting early in the pandemic. Roughly 6.3 million people were still unemployed in December, despite the unemployment rate nearing its pre-pandemic low. Unless those millions come off the sidelines, employers are poised to have a hard time filling roles.

The December JOLTS report doesn't even cover the period with the most Omicron infections. Daily case counts peaked in early January as holiday travel boosted the virus's spread. Infections have since trended lower, but it will be another month until data reveals exactly how Omicron affected job openings and quits.

It will take just a few hours, however, for the first reading on January hiring. ADP's private payrolls data for January is slated for release on Wednesday, and economists expect the report to show 207,000 jobs added to the economy. That would reflect a major deceleration from the 807,000 added in December.

Estimates for the government's own jobs report are even bleaker. The Friday report is estimated to show the country adding just 153,000 nonfarm payrolls in January, down from 199,000 and marking the worst month for job creation since December 2020. The unemployment rate is also expected to hold at 3.9%.

The hiring recovery is still moving forward. But with the labor shortage as intense as ever and hiring on the slowdown, the rebound is running on fumes.