The red-hot job market capped off 2022 on a high note, with employers adding 223,000 jobs in December, the Labor Department reported Friday.
The payroll numbers reflect a slowdown from the pace of job creation earlier in the year, but they are slightly above economists’ predictions that businesses had added about 200,000 jobs last month.
The unemployment rate fell to 3.5% as more workers found jobs, matching a 50-decade low. The Federal Reserve is seeking to tamp inflation by putting the brakes on the economy — including hiring — through its series of recent interest rate hikes. While employers added more jobs than expected in December, investors were cheered by last month’s cooler wage growth.
“It’s hard to imagine a jobs report in better balance,” said Robert Frick, corporate economist with Navy Federal Credit Union, in an email. “Wage growth is slowing, which will take some pressure off inflation, and could slow Fed rate increases.”
More health care jobs, fewer temp jobs
Job gains in the sectors of leisure and hospitality, health care, construction and durable goods manufacturing offset losses in temporary health services, non-durable goods manufacturing and information — the sector that contains technology and media companies.
Technology companies have been laying off workers for months, with some, including Amazon and Meta, saying they had hired too many people during the pandemic. This week, Amazon said it would increase its layoffs by an additional 18,000 people, and cloud software provider Salesforce said it would cut nearly 8,000 workers. Stitch Fix, the fast fashion provider, said Thursday that it’s cutting 20% of its salaried workers. DoorDash has said it will eliminate 1,250 jobs.
“Although there are an increasing number of high-profile layoffs, particularly in the technology sector and also in the mortgage industry, hiring in other sectors of the economy are more than offsetting these on net,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a note.
Average hourly pay, which had been increasing at an annual rate of 5% in September, fell to 4.6% last month. While frustrating for workers whose pay is lagging cost-of-living increases, the number is sure to be an encouraging sign for the Fed in its quest to lower inflation.
The Fed has hiked interest rates seven times in the past year, with Chair Jerome Powell emphasizing in recent remarks that strong job growth, and the pay increases employers must offer to find and keep workers, can perpetuate inflation. That’s because companies often raise prices to pass on their higher labor costs to their customers.
Friday’s lower-than-expected report gave investors hope that the Fed can ease off on its interest-rate increases, and sent stocks upward. The S&P 500 gained 0.4% at 10 a.m. Eastern time, while the Dow rose 0.6%.
