The economy added 223,000 jobs in December, a slight decrease from the previous month, according to the latest jobs report from the Bureau of Labor Statistics (BLS).
December's job growth was primarily driven by leisure and hospitality, health care, construction, and social assistance sectors. In November, the economy added 263,000 new jobs and 261,000 new jobs were added in October.
The unemployment rate in December stood at 3.5%, edging lower from the 3.7% recorded in November. This means the number of unemployed people in the country dropped to roughly 5.7 million from 6 million.
"Job growth remains strong, but it's clearly slowing," John Leer, chief economist at decision intelligence company Morning Consult, said in a statement. "Highly publicized layoffs in the tech sector have not affected the broader economy given how many job openings still exist, and higher interest rates have yet to meaningfully affect the demand for workers.
"However, as those higher borrowing costs constrain business investment during the first half of this year, hiring will also pull back," Leer continued. "We should enjoy this period of relative economic stability while it lasts."
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Annual wage gains also slowed in December
Wage growth in December increased by 0.3%. Over the past 12 months, average hourly earnings rose by 4.6%, down from last month's 5.1% annual growth.
And while wage growth has declined over the last several months it remains "well above levels consistent with 2 percent inflation over time," Federal Reserve Chair Jerome Powell said in a recent statement.
The Fed raised interest rates seven times in 2022 in a bid to bring inflation to a 2% target rate.
The most recent rate increase of 50 basis points happened in December. Its departure from the more aggressive 75 basis points increases the four previous times was linked to better inflation figures.
However, the Fed remains concerned over a still too tight labor market, an unemployment rate that neared "a 50-year low" high job vacancies and elevated wage growth.
"The one sign of softness was a reduction in wage growth, now at 4.6% on a year-over-year basis," Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president and chief economist, said in a statement. "The consistent slowing in the pace of wage growth may reflect employer caution as other data clearly signal a weaker economy in 2023.
"Slower wage growth should also be reflected in further reductions in the rate of inflation, as businesses will have less cause to push prices up to pay for higher wages," Fratantoni continued. "Ultimately, this should result in inflation dropping back to the Federal Reserve's 2% target."
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More job losses ahead in 2023, survey says
Sixty-one percent of business leaders expect their organizations will have layoffs in 2023, a recent ResumeBuilder.com survey said. Most of those respondents anticipated 30% or more of their workforce would be laid off in 2023.
"Our survey showed layoffs are more likely among larger companies," ResumeBuilder.com said. "Seventy-four percent of business leaders in companies with over 500 employees say there will likely be layoffs in their organization, compared to 51% of business leaders in companies with 500 or less employees."
While layoffs are bad for American workers, it would provide the sort of "tangible evidence" the Fed is looking for as a sign of "loosening in labor market conditions," Jim Baird, Plante Moran Financial Advisors chief investment officer at said in a statement.
"Fed Chair Jerome Powell has repeatedly indicated that there will need to be 'pain' to restore balance to labor markets and bring inflation down," Baird said. "Labor conditions are easing, but not nearly quickly enough to satisfy Fed policymakers looking for reassurance that they've done enough to achieve their policy goals.
"That means more interest rate hikes until job creation becomes job losses and the unemployment rate moves meaningfully higher," Baird continued.
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