According to the latest job report released by the Labor Department, the U.S. labor market remained strong in December, even as the Federal Reserve raised interest rates to the highest level in 15 years. Highlights from the report include:
👉 Non-farm payrolls: +223,000 (vs. +202,000 expected)
👉 Unemployment rate: 3.5% (vs. 3.7% expected)
👉 Average hourly earnings, month-over-month: +0.3% (vs. +0.4% expected)
👉 Average hourly earnings, year-over-year: +4.6% (vs. +5.0% expected)
Although the headline employment numbers have declined in recent months, hiring remains robust despite the Fed’s efforts to slow down significant job growth, which has placed upward pressure on wages and contributed to stubborn inflation. In December, average hourly earnings rose at a slightly lower pace of 0.3% from the revised 0.4% in November, while the annual gain in wages edged down to 4.6% from 4.8% the prior month.
Overall, the U.S. economy added 223,000 new positions in December, slightly more than the 200,000 jobs expected by Refinitiv economists, but marking the worst month for job creation in two years. Despite the slowdown in hiring, the unemployment rate unexpectedly fell to 3.5%.
Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, commented on the report saying, “No doubt the labor market has been able to withstand prolonged rate hikes better than many expected. Remember though that monetary policy acts on a lag so it’s likely an if and not a when for a slowdown in hiring. The Fed minutes made it clear that rates will remain high for all of 2023, so investors should prepare for a bumpy ride.”