Full story: US jobs market ends 2022 on a high
Dominic Rushe
The US jobs market ended 2022 on a high note, adding another 223,000 jobs in December, the department of labor reported on Friday.
The unemployment rate dipped to 3.5%, back to its pre-pandemic low, our US business editor Dominic Rushe reports.
The continued strength of the jobs market comes as the Federal Reserve has struggled to cool hiring and bring down inflation by raising interest rates at a pace unseen in a generation.
Jobs growth has slowed – the US added an average of 539,000 new positions per month in the first three months of 2022 – but over the year the economy added 4.5m jobs, the second strongest year on record.
The government jobs report comes a day after ADP, the US’s largest payroll supplier, announced private employers had added 235,000 for the month, well ahead of the 153,000 Dow Jones estimate and the 127,000 initially reported for November.
The Fed has been raising rates since March last year in response to the US’s cost of living crisis. The central bank raised rates seven times in 2022. While inflation has cooled from its peak of 9.1% in June, it remains high at 7.1%, well above the Fed’s 2% target rate, and is expected to remain elevated through 2023.
Key events
Closing post
Time to wrap up, after a busy day. Here’s the main stories so far:
Have a lovely weekend, we’ll be back on Monday morning. GW
The UK’s FTSE 100 blue-chip share index has also pushed higher.
The Footsie rose as high as 7,695 points, a level last touched in late July 2019, before dipping back a little.
It’s now up 50 points, or 0.66%, at 7,680 points. Mining companies are among the top risers, as the US dollar weakens – lifting commodity prices – following the US jobs report.
The FTSE 100 hit its lifetime high in May 2018, at 7,903 points.
“There is nothing recessionary from December’s jobs report and will help dispel near-term concerns on the US economy”, says Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin.
Mui adds that markets will be relieved to see wage growth slowing:
Job gains were higher than expected, the unemployment rate fell to 3.5% which matches the lowest since the 1960s and the underemployment rate dropped to the lowest on record.
While this combination of data is usually hawkish for markets, the highly watched wage growth figure slowed notably to 4.6% from 5.1% YoY. This is a relief to market that there is no sign of a wage spiral despite a persistently strong US labour market, which will help anchor inflation expectations. Indeed, there is no sign that longer term inflation expectations have become unanchored.
Wall Street rallies after US jobs report
Wall Street has opened higher, as investors are cheered by today’s US jobs report.
The Dow Jones industrial average of 30 major US companies has gained over 1%, or 377 points, to 33,307, while the broader S&P 500 index is also 1% higher.
Deceber’s better-than-expected job creation, with 223,000 new hires last month, suggests the US labor market remains solid. And the drop in wage growth may ease concerns over inflation.
Today’s jobs report was what markets wanted to hear, says Mike Bell, global market strategist at J.P. Morgan Asset Management:
Solid job gains but with signs that wage gains are moderating. The ideal scenario for 2023 is that wage growth and inflation moderate without a rise in the unemployment rate and this report suggests that outcome is not impossible.
“Our base case though remains that unemployment will have to rise to get wage growth and inflation back down to the Fed’s target. We think though that equities have already priced in a lot of bad economic news for 2023, so even a recession wouldn’t necessarily take stocks materially lower than their 2022 lows. If wage growth does come down this year without the need for a rise in the unemployment rate, stocks markets would likely cheer that outcome.”
Of the +223k jobs created payroll report main sector changes:
Goods +40k
– construction +28k
– manufacturing +8k
Services +180k
– Education & health svcs +78k
– leisure & hospitality +67k
Government +3k
– State Govt education -23.8k
– local govt +21k pic.twitter.com/xWpUyAXmmQ— Macro84 (@macro84) January 6, 2023
The “Arctic blast of high-profile tech layoffs” wasn’t enough to cool the broader US labor market in December, says Glassdoor chief economist Aaron Terrazas.
Meta, for example, announced 11,000 layoffs in November, while Tesla reportedly froze hiring last month and Twitter cut half its workforce the previous month.
Terrazas says the US employment market remains hot, despite efforts to cool it to subdue inflation.
Today’s jobs report from the U.S. Bureau of Labor Statistics shows job gains slowing to the still-too-hot pace of 223,000 in December from downward-revised 256,000 in November. The unemployment rate unexpectedly fell to 3.5 percent, but the labor force participation ticked higher by a tenth of a percentage point, still within the narrow range where it spent all of 2022.
With 2022 now squarely in the rearview mirror, rarely has such good news been greeted with such fear about what it could mean for the economy moving forward. Economists, policymakers and business decision makers are left to puzzle over why the labor market has, for the most part, been so stubbornly unresponsive to policy efforts explicitly designed to cool it.
Full story: US jobs market ends 2022 on a high
Dominic Rushe
The US jobs market ended 2022 on a high note, adding another 223,000 jobs in December, the department of labor reported on Friday.
The unemployment rate dipped to 3.5%, back to its pre-pandemic low, our US business editor Dominic Rushe reports.
The continued strength of the jobs market comes as the Federal Reserve has struggled to cool hiring and bring down inflation by raising interest rates at a pace unseen in a generation.
Jobs growth has slowed – the US added an average of 539,000 new positions per month in the first three months of 2022 – but over the year the economy added 4.5m jobs, the second strongest year on record.
The government jobs report comes a day after ADP, the US’s largest payroll supplier, announced private employers had added 235,000 for the month, well ahead of the 153,000 Dow Jones estimate and the 127,000 initially reported for November.
The Fed has been raising rates since March last year in response to the US’s cost of living crisis. The central bank raised rates seven times in 2022. While inflation has cooled from its peak of 9.1% in June, it remains high at 7.1%, well above the Fed’s 2% target rate, and is expected to remain elevated through 2023.
Today’s US jobs report shows that “the recession clock is ticking”, warns Seema Shah, chief global strategist at Principal Asset Management:
“A lower unemployment rate and weaker average hourly earnings growth is certainly going to get equity market bulls’ attention. Indeed, 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 sceptical. 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.”
There’s no sign of a meaningful slowdown in the US jobs market, says Srijan Katyal, global head of strategy & trading services at the international brokerage ADSS:
“This is another sizeable increase that shows that the US jobs market is giving no meaningful signs of slowing down, with nine consecutive reports beating estimates.”
“Another increase of this size is positive for workers as it supports salary growth, but this will further buoy the high inflation the Fed has been fighting with record interest rate hikes.”
“With the Fed highlighting a focus on retaining flexibility for future rate changes, they will be looking at this data closely. This job growth will likely be too high for the Fed, which could lead to further rate increases of a substantial size.”
John Leiper, chief investment officer at Titan Asset Management, says today’s jobs report is ‘decent’.
But, he predicts it won’t deter the US Federal Reserve from raising interest rates higher this year:
“Decent non-farm payroll today, coming in above expectations with a notable drop in the unemployment rate pointing to ongoing labour market tightness, although interesting to note the slight moderation in employee earnings.
Bottom line, this will do little to deter the Fed from its current hawkish stance. Good news is bad news as it increases the propensity of the central bank to continue hiking rates and to keep them there for longer. We remain defensively positioned across risk assets.”
Average hourly earnings growth slows
Wage growth slowed last month – a blow to US workers, but pleasing news for central bankers trying to cool inflation.
In December, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.3%, to $32.82.
That’s a slowdown on November, when average hourly earnings rose by 0.4% to $32.73.
Over the past 12 months, average hourly earnings have increased by 4.6%, a slowdown on November’s 4.8%.
Key NFP data for December 2022:
• Nonfarm payrolls come in at +223,000 vs. estimates of 200k.
• 3.5% unemployment rate, down from 3.7%.
• Labor force participation rate is 62.3%, up from 62.1%
• Average hourly earnings +4.6% YoY & +0.3% MoM.Strong, resilient, and dynamic.
— Caleb Franzen (@CalebFranzen) January 6, 2023
The US labor force participation rate has inched up to 62.3%, the highest since September, up from November’s 62.2%.
That indicates more people were looking for work last month.
But, the jobs report points out, this is 1.0 percentage point below its values in February 2020, prior to the coronavirus (COVID-19) pandemic.
