Employment slowed modestly in December as employers added 223,000 jobs to close an otherwise buoyant year, which could herald a deeper downturn and economic recession that many economists predict in 2023.
On Friday, the Labor Department said the unemployment rate fell from 3.7% to 3.5%.
Economists polled by Bloomberg estimated that 200,000 jobs were added last month.
For the whole of 2022, the United States added 4.5 million jobs, second only to the 6.7 million gained the year before, as the nation continued to recover from record job losses in the early days of the COVID-19 pandemic.
Job gains for October and November were revised down by a total of 28,000. October was revised from 284,000 to 263,000 and November from 263,000 to 256,000, painting a slightly weaker picture of job growth in the fall.
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How much did wages rise in 2022?
The report showed some good news for the Federal Reserve, which is determined to bring down inflation. Last month, average hourly earnings rose 9 cents to $32.82, bringing the annual increase down to a still-up 4.6% from the downwardly-adjusted 4.8% the previous month. The Fed is looking for a rollback in wage increases to slow inflation, which reached a 40-year high last year, and halt its aggressive campaign of interest rate hikes that could tip the economy into recession.
What is the labor force participation rate?
Also, the share of adults who are working or looking for a job increased to 62.2% from 62.1%, still well below the pre-pandemic level of 63.4%. The greater labor supply puts downward pressure on wages as employers do not need to compete as aggressively for job candidates.
Industries that are hiring
The leisure and hospitality industry, the industry hardest hit by the pandemic, led job gains with 67,000 jobs. health care added 55,000 jobs; construction, 28,000; and social assistance, 20,000.
Gains in other sectors were weak, with manufacturing adding 8,000 jobs; retail, 9,000; Transportation and storage 5000.
Temporary assistance services cut 35,000 jobs, the fifth consecutive monthly decline. That could herald deeper job losses across the broader economy in the coming months because employers often cut temporary workers before laying off permanent employees.
Have all the jobs lost due to COVID been recovered?
By August, the economy had recovered all of the 22 million that the health crisis had wiped out. But payrolls are still two million jobs shy of where they would be had the pandemic not happened, based on population growth. The leisure and hospitality sector, the sector hardest hit by the crisis, remains nearly a million jobs below the pre-COVID level.
Monthly job growth has slowed through 2022, from a staggering 457k pace in the first seven months of the year to 275k since July. Employment has eased since all of the 22 million lost jobs were restored. Also, high inflation — and aggressive rate hikes by the Fed to tame it — is beginning to dampen economic activity and the labor market.
ADP Jobs Report
Data from payroll processing company ADP indicated that employers added 253,000 jobs last month, beating the Dow Jones estimate of 153,000 jobs. ADP data also showed that wage growth slows for people who stay employed. The average annual wage increase for these workers fell to 7.3% in December from 7.6% in November.
Dow Jones futures contracts
Dow futures jumped following the release of the report. The indicator is set to open more than 300 points.
The index lost nearly 9% of its value in 2022 compared to the S&P and Nasdaq Composite, which lost 19% and 33%, respectively.
US recession in 2023?
Most economists expect the United States to slide into a mild recession this year as the Fed’s interest rate increases increasingly weigh on spending and growth. Such expectations have dampened consumer and business confidence.
However, despite the obstacles, the job market has been remarkably resilient, repeatedly defying expectations of a more dramatic slowdown. To deal with soaring inflation, many families have drawn from the $2.6 trillion in additional savings they collected from government stimulus checks and spending cuts during COVID.
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Is there still a labor shortage?
And since millions of Americans retired early or stopped working during the coronavirus outbreak, the resulting labor shortage has left employers struggling to find workers and reluctant to announce layoffs despite the dire outlook. Initial jobless claims, a measure of layoffs, remain low, despite Amazon announcing 18,000 job cuts Thursday, the latest in a huge wave of tech company layoffs this year.
Many continue to hire despite the cloud of uncertainty over the economy.
Judy Briggs, a 1-800-GOT-JUNK franchisee in Hopkinton, Massachusetts, says sales increased 3% in 2022, down from about 15% in the past several years, and she expects similarly modest gains this year. A sharp contraction in the housing sector means that fewer people are moving, reducing demand for a service that hauls in things like old furniture, appliances and tyres.
But, she says, “people (including renters) still move in and they still take out the trash,” she says.
Also, in light of the labor shortage, she wants to have enough staff to handle staff turnover and absenteeism related to COVID.
It plans to add about five workers to its 35 permanent staff, the same number as last year.
“It’s hard to find staff these days,” she says.
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