The December jobs report was positive—but it doesn’t cast an optimistic prediction going into 2023.
- The U.S. Bureau of Labor Statistics (BLS) released its December jobs report on Friday, January 6, showing positive news for an economy poised to cool in 2023.
- “Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate edged down to 3.5%,” says BLS.
- CNBC notes this was 0.2% below expectations and marked a slight decrease from November’s 256,000 new jobs. It suggests the labor market is strong even as the Federal Reserve’s actions set the job market to chill. Wage growth increased by 0.3%, reflecting a yearly growth of 4.6%, but marking a decline in growth overall.
- The stock market rallied Friday following the announcement, with the Dow Jones raising 2.1% by closing.
- The BLS will be announcing December’s CPI on Thursday, January 12.
Why It’s News
The news reflects a surprisingly strong labor market despite the current policies of the Federal Reserve. As we previously reported, the Fed has been hiking interest rates in an attempt to purposely slow the economy and uproot entrenched inflation. Fed Chair Jerome Powell acknowledges that this is a painful but necessary step to avoid the worse outcome of high inflation.
The BLS’s could be a sign of declining economic momentum in the long term. While inflation has decreased slightly since rates began hiking, the labor market has yet to cool. U.S. workers remain optimistic about their job prospects going into 2023, although analysts fear a more significant economic backlash in the second half of the year.
“After two straight years of record-setting payroll growth following the pandemic-related disruptions, the labor market is starting to show signs of stress. That suggests 2023 could bring slower hiring or outright job declines as the overall economy slows or tips into recession,” says The Wall Street Journal.
“Expectations for a soft landing in the economy have likely been boosted in light of today’s jobs report—yet, with the unemployment rate back to the historic low of 3.5%, how realistic is it to expect wage growth to move meaningfully lower? The Fed will likely be skeptical. And so, with the record low unemployment rate indicating that there is still so much work ahead of them, Fed policy rates are set to rise above 5% within just a few months, and a hard landing looks to be the most likely outcome this year. The recession clock is ticking,” Principal Asset Management Chief Global Strategist Seema Shah told Yahoo Finance.