The state employment report for December continued to show that the labor market was weakening toward the end of the year, with the unemployment rate increasing for the fifth consecutive month. From a longer-term perspective, however, the weakness toward the end of the year was merely a partial offset to the strength we saw in the first half of 2023.
The state unemployment rate increased by 0.1 percentage points in December, rising from 3.3% to 3.4%. That is 0.6 higher than the record-low of 2.6% reported for June and July. Nevertheless, we ended the year with the same unemployment rate we had at the start of the year. The net change in the number of unemployed from the end of 2022 was only 446.
The December report also showed a decline in the number of employed for the third consecutive month, along with the second monthly decline in the size of the labor force. But these declines only partly offset the gains from earlier in the year. From December 2022 to December 2023, the household survey showed that the number of employed increased by 18,263 and the size of the labor force increased by 18,709.
The data for 2023 will be revised before we get our first reading on 2024. Typically, the end-of-year unemployment rate is subject to very small revisions, with the path from the beginning to the end of the year showing the effects of additional data refinements. We expect the revised data to show a smoothing of the relatively large swings in the number of unemployed that were reported during 2023.
Nonfarm payroll employment increased by 5,800 in December, recovering more than half of the employment losses reported for the previous three months (seasonally adjusted data). Expanding sectors included all major goods-producing sectors, with Construction and Durable Goods Manufacturing showing substantial gains. Relatively strong holiday shopping boosted employment in Retail Trade. Among service-providing sectors, employment in Education & Health Services and Other Services continued to expand, while Leisure & Hospitality Services contracted slightly. Compared to December 2023, payroll employment growth totaled 15,100, or about 1.1%.
Including the December increase, payroll employment has expanded by 62,700 since February 2020 (pre-COVID) amounting to a gain of 5.3%. Over the same period, the net change in U.S. employment has been 3.2%.
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Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format consistent with the monthly news release from the Arkansas Division of Workforce Services, can be found here: Table-Seasonally Adjusted NFPE.