Hiring slowed modestly in December as employers added 223,000 jobs to cap another year of growth, likely foreshadowing the deeper rebound and recession many economists expect in 2023.
The unemployment rate fell to 3.5% from 3.7%, the Labor Department said on Friday.
Economists polled by Bloomberg had estimated that 200,000 jobs were added last month.
For all of 2022, the US added 4.5 million jobs, second only to 6.7 million last year, as the country recovered from record job losses in the early days of the COVID-19 pandemic.
Job gains fell by a combined 28,000 in October and November. October was revised up from 284,000 to 263,000 and November from 263,000 to 256,000, painting a slightly weaker portrait of job growth in the fall.
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The report contained good news for the Federal Reserve, which is determined to reduce inflation. Last month, average hourly wages rose 9 cents to $32.82, slowing the annual increase to 4.6% from last month’s 4.8% decline. The Fed is looking to scale back wage growth to curb inflation, which hit a 40-year high last year, and to halt an aggressive interest rate hike that could send the economy into recession.
What is the labor force participation rate?
Also, the share of adults working or looking for work increased from 62.1 percent to 62.2 percent, still below the pre-pandemic level of 63.4 percent. A greater labor supply puts pressure on wages because employers don’t have to compete for job candidates.
Areas that are hiring
Entertainment and hospitality, the industry hardest hit by the pandemic, saw a job gain of 67,000. Health care added 55,000 jobs; construction, 28,000; and social assistance, 20,000.
Gains in other sectors were slow, with manufacturing adding 8,000 jobs; retail, 9000; and transportation and storage, 5,000.
Temporary help services lost 35,000 jobs, its fifth monthly decline. That could foreshadow deep job losses across the broader economy in the coming months, as employers often lay off temporary workers before laying off permanent workers.
Another sign of future declines: Americans worked an average of 34.3 hours last month, marking the second straight monthly decline and the lowest rate since April 2020. Employers typically make existing employees work fewer hours before cutting jobs and hiring.
Have all the jobs lost to COVID been restored?
By August, the economy had recovered all 22 million people lost in the health crisis. But payrolls are still several million jobs short of where they would be if the pandemic hadn’t happened, based on population growth. Leisure and hospitality, a sector hit hard by the crisis, remains about 1 million jobs below its pre-Covid levels.
Monthly job growth has slowed through 2022, from a blockbuster pace of 457,000 in the first seven months of the year to a more steady 275,000 since July. After all 22 million lost jobs were recovered, hiring softened. Also, high inflation—and the Fed’s aggressive interest rate hikes to tame it—shrunk economic activity and the labor market.
ADP jobs report
Data from payroll processing firm ADP showed employers added 253,000 jobs last month, beating the Dow Jones estimate of 153,000. The ADP data also showed that wage growth is slowing for people who remain on the job. The average annual wage growth of these workers decreased to 7.3% in December from 7.6% in November.
Dow Jones futures
Dow futures rose after the report. The index is set to rise more than 300 points.
The index has lost nearly 9% in 2022, compared to the S&P and Nasdaq Composite, which have lost 19% and 33%, respectively.
A recession in the US economy in 2023?
Most economists expect the US to enter a mild recession this year as the Fed’s rate hikes take a growing toll on spending and growth. Such forecasts have further weakened consumer and business confidence.
But despite the headwinds, the labor market has been remarkably resilient, repeatedly defying forecasts of a sharp downturn. To combat rising inflation, many households have drawn on $2.6 trillion in additional savings from government stimulus checks and spending cuts during the COVID-19 pandemic.
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Is there still a labor shortage?
And as millions of Americans retire early or take time off during COVID, 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 low, although Amazon announced 18,000 job cuts on Thursday, the latest in a big wave of layoffs at tech companies this year.
Many continue to hire despite the cloud of uncertainty over the economy.
Judy Briggs, owner of the 1-800-GOT-JUNK franchise in Hopkinton, Massachusetts, says sales are expected to grow 3% in 2022, down from about 15% in the past few years, and she expects the same this year. to get some modest profit. A severe housing downturn means fewer people are moving, softening demand for services that haul old items such as furniture, appliances and tires.
But “people (including renters) are still moving and getting rid of trash,” she says.
Also, in light of labor shortages, he wants to have enough staff to handle employee turnover and COVID-related absences.
He plans to add about five employees to his permanent team of 35 people next year.
“It’s hard to find workers these days,” he says.
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