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.
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.
The annual rate of inflation is still running well ahead of wage gains but the Fed has argued that a tight labor market has led to inflation-fueling income gains. So far the Fed’s hikes have done little to cool the jobs market.
Some sectors – notably tech – have announced large layoffs. But the tech sector is a relatively small employer and the government’s latest survey showed strong gains in leisure and hospitality, healthcare, construction, and social assistance.
“The labor market is strong but fragmented, with hiring varying sharply by industry and establishment size,” ADP’s chief economist, Nela Richardson, said. “Business segments that hired aggressively in the first half of 2022 have slowed hiring and in some cases cut jobs in the last month of the year.”
