Job market ends 2022 on a high note
(CN) — Beating expectations, the U.S. economy added 223,000 jobs in December as the unemployment rate fell back to a half-century low of 3.5%.
While the monthly gain was the lowest in two years, it still came in above the Dow Jones estimate of 200,000 new positions.
In total, American employers added 4.5 million jobs in 2022, an average of 375,000 per month, according to a Labor Department report released Friday morning. That’s second only to 2021, when 6.7 million jobs were added back after the Covid-19 pandemic decimated the economy the year before.
The labor market’s resilience means the Federal Reserve is likely to continue hiking interest rates in an attempt to cool down the economy in the face of high inflation.
Nick Bunker, economic research director for North America at career site Indeed, said Friday’s jobs report is a good sign for those hoping the Fed can pull off a so-called soft landing, which would see growth slowing enough to tame inflation but not so much as to cause a recession.
“If these trends continue, we can feel more and more confident that the strength of this labor market is sustainable,” Bunker wrote. “The outlook for next year is uncertain, but many signs point toward a soft landing.”
Andrew Hunter, senior U.S. economist at Capital Economics, agreed that the report shows a higher chance for a soft landing.
“Overall, the data are a mixed bag for the Fed and will probably keep it hiking at the next couple of meetings,” he wrote. “But we continue to expect weaker labor market conditions to push wage growth even lower soon, helping to reinforce the downward trend in core inflation already underway.”
Leisure and hospitality continued to lead the way in payroll growth last month, adding 67,000 jobs. That includes 26,000 at bars and restaurants, 25,000 at amusement, gambling and recreation establishments, and 10,000 in accommodation. The industry averaged 79,000 new jobs a month in 2022 but is still 932,000 below its pre-pandemic level.
Employment in health care grew by 55,000 in December, and there were 28,000 more jobs in construction. The social assistance field added 20,000 positions while retail and manufacturing added 9,000 and 8,000, respectively.
In the public sector, a loss of 24,000 jobs in state government education blamed on university employee strikes was offset by a gain of 5,100 jobs in other state government offices, 21,000 in local government and 1,000 at the federal level.
The unemployment rate fell 0.2% last month from 3.7% to 3.5%, a 53-year low that has been recorded several times in recent years.
Wage growth, meanwhile, slowed slightly, coming in at a 4.6% annual increase compared to 5.1% in November.
“The solid 223,000 gain in nonfarm payrolls and drop-back in unemployment to a 50-year low in December will, at face value, do little to ease the Fed’s concerns about resilient core services inflation,” Hunter said. “That said, the softer gain in average hourly earnings suggests wage growth is nevertheless slowing, and we still think the labor market will weaken more markedly this year."
Overall, Bunker said 2022 “was a year of tumult in many ways but it was also a year of rapid job gains, low unemployment, and strong wage hikes.”
“The hope is the strength of the U.S. labor market can provide a solid foundation for the U.S. economy in the year ahead,” he added.
President Joe Biden called the December jobs report “great news” and said it is proof his economic plan is working.
“The unemployment rate is the lowest in 50 years. We have just finished the two strongest years of job growth in history. And we are seeing a transition to steady and stable growth that I have been talking about for months,” Biden said in a statement Friday morning.
The president said a moderation in monthly job gains is an indication of stability and is to be expected over the coming months. He also pointed to signs that inflation is coming down.
“We still have work to do to bring down inflation, and help American families feeling the cost-of-living squeeze. But we are moving in the right direction,” he said.