The U.S. labor market ended 2023 on a strong note, the Labor Department reported Friday, as the pace of hiring was even faster than expected.
Employment data for December showed that employers added 216,000 jobs in the month, but the unemployment rate remained at 3.7%. Employment growth was a sharp increase from November's downwardly revised figure of 173,000. The number for October was also revised downward from 150,000 to 105,000, indicating a slight weakening in the growth outlook for the fourth quarter.
Economists surveyed by Dow Jones had expected employment to rise by 170,000 and the unemployment rate to rise to 3.8%.
A more comprehensive measure of unemployment, which includes discouraged workers and those in part-time work for financial reasons, rose to 7.1%. This increase in the “real” unemployment rate is due to the fact that the number of employed people decreased by 683,000, while the number of people holding multiple jobs increased by 222,000, according to the household survey used to calculate the unemployment rate. I woke up in response to what was shown to me.
The labor force participation rate, or the proportion of the civilian working-age population who are employed or looking for work, fell to 62.5%, the lowest level since February, a drop of 0.3 percentage points, and a monthly decline of 676,000 people.
The report, combined with revisions to last month's statistics, predicts job growth in 2023 by 2.7 million, or an average of 225,000 per month, down from 4.8 million in 2022, or an average of 399,000 per month. .
The major averages meandered throughout the day as the market reacted to the lower-than-expected numbers in the ISM services index. The indicator came in lower than expected at 50.6, reflecting only a slight expansion, and the employment component at its lowest level since May 2020.
Most government bond yields rose, especially for the long term.
The December job gains reflected in the Labor Department's report were due to an increase of 52,000 jobs in government jobs and an additional 38,000 jobs in healthcare-related fields such as outpatient medical services and hospitals. . Leisure and hospitality increased by 40,000 total, social assistance by 21,000 and construction by 17,000. According to the Labor Department, retail trade has remained roughly flat since the beginning of 2022, with retail trade increasing by 17,000.
On the downside, the transportation and warehousing industry lost 23,000 jobs.
The report showed that inflationary pressures remain prevalent in the labor market, even as they have receded elsewhere. Average hourly wages increased by 0.4% month-on-month and 4.1% year-on-year, exceeding expectations of 0.3% and 3.9%, respectively. His average weekly working hours decreased slightly to 34.3 hours.
The federal funds futures market also responded, with the probability that the U.S. Federal Reserve will cut interest rates in March dropping to about 56%, according to CME Group.
“Today's report shows that the Fed has a difficult road to return to 2% inflation,” said Andrew Patterson, senior international economist at Vanguard. “We believe a decision on when to first cut policy rates remains in the second half of this year.”
Despite the Fed's anti-inflation campaign, which has raised interest rates a total of 5.25 percentage points 11 times since March 2022, marking its most aggressive monetary tightening in 40 years, Friday The data confirms that the US economy continues to defy expectations for a slowdown. Year.
Fed officials announced at their December meeting that they expect they may cut interest rates by a quarter of a percentage point three times this year. However, markets expect the central bank to be more aggressive, with futures traders pricing in as many as six rate cuts.
The view that the Fed can start cutting rates is supported by expectations that inflation will continue to recede after reaching a 41-year high in mid-2022. Inflation remains above the Fed's 2% target, but it has been steadily declining since the start of interest rate hikes.
But Friday's report could cast doubt on the market's view that the Fed will ease significantly.
Seema Shah, chief global strategist at Principal Asset Management, said: “Job growth remains resilient, and the economy may be ready for a policy rate cut as early as March.'' “This confirms the growing skepticism that this is the case.” “In fact, recent labor market data generally points in one direction: strength.”
Economic growth remains strong after consecutive quarters of negative growth starting in 2022. Gross domestic product (GDP) is expected to grow at an annualized rate of 2.5% in the fourth quarter, according to GDPNow, the Atlanta Fed's real-time economic data tracker.
Consumers are also showing resilience. Holiday spending this year will likely increase 5% to $222.1 billion, a record high, according to forecasts from Adobe Analytics.
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