The US economy added jobs at a solid clip in December, pushing the unemployment rate back to a pre-pandemic low of 3.5 per cent as the labour market remains tight, but Federal Reserve officials could draw some solace from a moderation in wage gains.
Still, the US central bank’s fight against inflation is far from being won. The Labor Department’s closely watched employment report yesterday also showed household employment increasing by a whopping 717,000 jobs last month.
Recent declines in household employment had fanned speculation that nonfarm payrolls, the main measure of employment gains, were overstating job growth.
The labour market has remained strong, despite the Fed embarking last March on its fastest interest rate-hiking since the 1980s. It is underpinning the economy by sustaining consumer spending. But the economy’s resilience raises the risk the Fed could lift its target interest rate above the 5.1pc peak the central bank projected last month and keep it there for a while.
“The labour market remains resilient but is losing pep and worker shortages remain intense,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
Nonfarm payrolls increased 223,000 last month. Data for November was revised lower to show 256,000 jobs added instead of 263,000 as previously reported. Economists polled by Reuters had forecast payrolls increasing by 200,000 jobs, with estimates ranging from 130,000 to 350,000.
The economy added 4.5 million jobs in 2022, with employment gains averaging 375,000 per month.
Employment gains last month were led by the leisure and hospitality industry, which added 67,000 jobs. Restaurants and bars as well as amusement parks, gambling and recreation places accounted for the bulk of the increase in hiring.
Leisure and hospitality payrolls remain 932,000 below their pre-pandemic level.
Healthcare industry employment increased by 55,000 jobs. Construction payrolls rose 28,000, despite the house market collapsing under the weight of higher borrowing costs. Manufacturing employment rose 8,000. There were also gains in transportation and warehousing payrolls as well as retail.
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