Hiring slowed slightly in December as employers added 223,000 jobs to end an otherwise strong year, perhaps foreshadowing the deeper pullback and recession that many economists predict in 2023.
The unemployment rate fell from 3.7% to 3.5%, corresponding to a 50-year low, the Labor Department announced on Friday.
For all of 2022, the United States added 4.5 million jobs, second only to the 6.7 million gained the previous year, as the country continued to recover from record job losses in early days of the COVID-19 pandemic.
Employment gains for October and November were revised down by a total of $28,000. October’s was revised from 284,000 to 263,000 and November’s from 263,000 to 256,000, painting a slightly weaker picture of employment growth in the fall.
“We believe payroll growth will slow significantly,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients.
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How much have salaries increased in 2022?
The report contained good news for a Federal Reserve determined to reduce inflation. Last month, the average hourly wage rose 9 cents to $32.82, bringing the annual increase down to 4.6% from 4.8% the previous month. The Fed is seeking a rollback in wage increases to bring down inflation that hit a 40-year high last year and pause its aggressive campaign of interest rate hikes that could tip the economy into recession. recession.
What is the activity rate?
Additionally, the share of adults working or looking for work increased slightly from 62.2% to 62.32%, still leaving it well below the pre-pandemic level of 63.4%. . A larger labor supply puts downward pressure on wages, as employers do not need to compete as fervently for applicants.
Sectors that are hiring
Leisure and hospitality, the industry hardest hit by the pandemic, led job gains with 67,000. health care added 55,000 jobs; building site, 28,000; and welfare, 20,000.
Gains in other sectors were weak, with manufacturing adding 8,000 jobs; retail, 9,000; and transportation and warehousing, 5,000.
Temporary help services lost 35,000 jobs, its fifth consecutive monthly decline. This could portend greater job losses across the economy in the months to come, as employers often cut temporary workers before laying off permanent staff.
Another hint of a slowdown to come: Americans worked an average of 34.3 hours last month, marking the second consecutive monthly decline and the lowest level since April 2020. Employers are generally making employees work fewer hours existing ones before cutting jobs and hiring.
Have all the jobs lost to COVID been recovered?
In August, the economy recovered the 22 million people wiped out by the health crisis. But the payroll is still a few million jobs lower than it would be had the pandemic not happened, based on population growth. Leisure and hospitality, the sector hardest hit by the crisis, remains nearly a million jobs below their pre-COVID level.
Monthly job growth has slowed through 2022, from a torrid pace of 457,000 in the first seven months of the year to a still-strong 260,000 since July. Hiring has slowed since the 22 million jobs lost were recovered. In addition, high inflation – and the Fed’s aggressive interest rate hikes to rein it in – began to dampen economic activity and the labor market.
Dow Jones, S&P 500 and Nasdaq Composite Updates
Stocks opened higher after the release of the jobs report, likely on news of weaker wage increases that could mean fewer Fed rate hikes. The Dow Jones Industrial Average jumped nearly 400 points, or 1.2%. He began to run out of steam around 9:40 a.m. ET but recovered quickly.
The S&P 500 and the Nasdaq Composite moved in similar directions.
In 2022, the Dow lost nearly 9% of its value while the S&P and the Nasdaq Composite lost 19% and 33% respectively.
Recession of the American economy in 2023?
Most economists expect the United States to slide slightly lower this year as the Fed rate rises and increasingly weighs on spending and growth. These forecasts further weakened consumer and business confidence.
Yet despite the headwinds, the labor market has been remarkably resilient, repeatedly defying forecasts of a more dramatic downturn. To cope with soaring inflation, many households dipped into the $2.6 trillion in additional savings they amassed from government stimulus checks and reduced spending during COVID.
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Is there still a labor shortage?
And as millions of Americans retired early or took a break during COVID, the resulting labor shortages have left employers struggling to find workers and reluctant to announce layoffs despite dire forecasts. Initial jobless claims, an indicator of layoffs, are still weak, although Amazon announced 18,000 job cuts on Thursday, the latest in a huge wave of layoffs at tech companies this year.
Many continue to hire despite the cloud of uncertainty over the economy.
Judy Briggs, owner of a 1-800-GOT-JUNK franchise in Hopkinton, Mass., says sales are up 3% in 2022, from about 15% in recent years, and she expects a similar modest gain This year. The sharp decline in housing means fewer people are moving, dampening demand for a service that hauls items such as old furniture, appliances and tires.
But she says, “People (including tenants) are always moving out and always getting rid of trash,” she says.
Also, given the labor shortages, she wants to have enough staff to manage staff turnover and COVID-related absences.
It plans to add about five workers to its permanent workforce of 35, the same as last year.
“It’s hard to find employees these days,” she says.
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Some other labor market measures showed that strong hiring continued in December.
Data from payroll processing firm ADP indicated that employers added 253,000 jobs last month, beating Dow Jones estimates of 153,000. Data from ADP also showed that wage growth is slowing for people who keep their jobs. The median annual increase in earnings for these workers rose from 7.6% in November to 7.3% in December.
Contributor: Elisabeth Buchwald in New York.
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