The American workforce continued to grow at a robust pace last month, slowing only slightly as the Federal Reserve maintained its aggressive campaign to cool the world’s largest economy.
Employers added 223,000 jobs in the United States in December, clearing expectations of 200,000 but falling from 256,000 the previous month.
It capped an extraordinary year of expansion for the US labour market. Employers added 4.5 million jobs over the course of 2022, the second highest year since records began. During the highest, 2021, the economy entered recovery mode following the disruption wrought by the onset of Covid-19.
The unemployment rate edged down to 3.5 per cent and the data showed a rise in recruitment in the construction, healthcare and leisure and hospitality sectors.
Wall Street’s main indices opened sharply higher, as cooling wages and a moderation in jobs growth eased concern over about the path of interest rate rises. The Dow Jones industrial average rose 125.22 points, or 0.4 per cent, at the open to 33,055.30. The S&P 500 opened 15.27 points higher, or 0.40 per cent, at 3,823.37, and the Nasdaq Composite gained 58.72 points, or 0.57 per cent, to 10,363.96.
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Average hourly earnings increased by 0.3 per cent in December, according to the US Bureau of Labor Statistics. This was short of economists’ forecasts of about 0.4 per cent, and a possible sign of progress as the Fed seeks to tackle price growth. The headline unemployment rate slipped to 3.5 per cent, from 3.7 per cent in November.
The central bank scrambled to curb inflation last year, implementing a series of bumper interest rate rises that heightened concern over the economic outlook. Senior officials including Jerome Powell, the Fed chairman, have emphasised that it intends to stay the course until price growth — which scaled its highest levels in a generation last year — is on a sustained downward path.
“Expectations for a soft landing in the economy have likely been boosted in light of today’s jobs report,” Seema Shah, chief global strategist at Principal Asset Management, said. “Yet, with the unemployment rate back to the historic low of 3.5 per cent, how realistic is it to expect wage growth to move meaningfully lower? The Fed will probably 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 per cent within just a few months and a hard landing looks to be the most likely outcome this year. The recession clock is ticking.”
The monthly non-farm payrolls release is widely regarded as the most important indicator of how the US economy is performing. It shows how many staff were hired or fired by private employers other than farms, which are excluded from the figures because of seasonal variations.
