The U.S. economy saw more jobs in December, forcing the jobless rate back to 3.5%, a pre-pandemic low, while the job market remains tight. However, officials from the Federal Reserve could use some comfort from moderation in pay growth.
Despite the increase in jobs, America’s central bank is still fighting against inflation, and it seems a victory is still to be seen on the horizon. The Labor Department’s employment report, which was released on Friday, also showed household employment going up by 717,000 in December 2022.
The decline recently observed in household employment has caused many to speculate that nonfarm payrolls, which is the main factor used to measure job gains, were overstating job growth.
The employment market has stood its ground even though, in March 2022, the Federal Reserve put forth its fastest interest rate hikes since the 80s. The central bank did so as it is underpinning the country’s economy by trying to sustain consumer spending. However, the economy’s resilience increases the risk that the Fed could go beyond the 5.1% peak projection of its target interest rates last month and maintain it for a while.
According to BMO Capital Markets senior economist Sal Guatieri, “The labor market remains resilient but is losing pep and worker shortages remain intense. While wage growth has moderated, it’s still far from consistent with price stability. Don’t look for the Fed to ratchet down its hawkish talk or slow the pace of rate hikes on February 1.”
Last month, the number of nonfarm payrolls went up by 223,000. Statistics collected for November were revised and lowered to reflect 256,000 added instead of the previously reported 263,000. Reuters polled economists, forecasting payrolls going up by 200,000 jobs, with projections ranging between 130,000 and 350,000.
The economy saw a 4.5 million job increase last year, with numbers going up by 375,000 on average every month.
The leisure and hospitality sector enjoyed the most gains in December, which saw an increase of 67,000 jobs. However, this industry still sits 932,000 below its pre-pandemic numbers.
Meanwhile, the healthcare sector saw jobs go up by 55,000. Additionally, payrolls went up in the construction sector by 28,000, even though the housing market is collapsing due to the growing weight of borrowing costs rising. The other sectors included in the report are manufacturing, retail, warehousing, and transportation.