The US added 216,000 jobs in December, beating forecasts

The labor market ended the year with a bang.

Employers added a seasonally adjusted 216,000 jobs in December, the Labor Department reported Friday, beating economists’ forecasts. It was the 36th consecutive month of gains.

Overall, the U.S. economy created about 2.7 million jobs last year. That’s a smaller gain than in 2021 or 2022, during the economy’s initial rebound from pandemic lockdowns. Yet 2023 gains are still greater than those at the end of 2010.

The figures are in line with expectations of what is called a soft landing – in which the economy can avoid significant job losses while shifting into a calmer, more sustainable gear, after the disorienting volatility that began with the arrival of Covid-19, around four percent . years ago.

Many experts warn that December data is difficult to calculate in any year due to the employee turnover caused by the holidays.

The unemployment rate, based on a household survey, remained unchanged at 3.7 percent.

Employees’ average hourly earnings – a common measure of wage increases – rose 0.4 percent from the previous month and were up 4.1 percent from December 2022, an unexpectedly strong increase that could help improve employee sentiment if inflation continues to decline.

Layoffs are still at record lows, below pre-pandemic levels.

The resilience of job and wage gains is all the more remarkable in light of the Federal Reserve’s aggressive series of rate hikes over the past few years.

But as always, threats to overly optimistic views abound.

Heading into 2023, more than 90 percent of top executives surveyed by the Conference Board said they expected a recession. The resilience of the economy has prompted many business leaders to adjust their overall expectations and, in many cases, their hiring plans. Some believe the full impact of higher borrowing costs may still be looming.

Kathy Bostjancic, chief economist at insurance giant Nationwide, predicts the economy will experience at least a moderate recession this year.

“We are already seeing signs that cyclical sectors of the economy are pulling back significantly on adding workers to their payrolls,” she wrote in a note outlining her annual outlook. “We project moderate job losses by mid-2024. The unemployment rate should rise to around 5 percent later in 2024.”

Services such as health care, Social Security and state and local governments led job growth in December, but other previously hot sectors such as transportation and warehousing lost jobs or increased only slightly, a possible indicator of cooling.

And according to the government survey, the workforce shrank by nearly 700,000 workers. That was unwelcome news after steady growth in the labor force for much of 2023.

Over the past year, there has been tension between continually improving headline economic data and household frustration over higher prices and other ongoing pandemic shocks. Inflation exceeded wage increases for almost two years. However, that balance has shifted in recent months and is expected to continue.

The closely watched University of Michigan Consumer Sentiment Index rose for much of the year, but was still lower in December than 83 percent of the time since 1978, a period of shocks and slumps that on paper look worse look. .

That disconnect has hurt voters’ views on President Biden’s handling of the economy, surveys show.

The geopolitical chaos has upended previous predictions that inflation would fall if the economy remains stable and supply chains would calm down. In 2022, Russia’s invasion of Ukraine caused the prices of oil and a wide range of food and energy commodities to soar, sometimes doubling or more.

Last year largely brought a lull in new disruptions. But fires in the Middle East have grown since the fall, threatening key international trade routes. International shipping giant Maersk has announced that for the foreseeable future it will keep container ships away from the Red Sea, where drone and missile attacks on merchant ships have increased in recent weeks.

As a result, the cost of shipping goods from Asia to Northern Europe soared about 170 percent since December. For now, however, oil prices have remained largely unaffected. And analysts on the optimistic side of the US economic debate are largely sticking to their guns.

Joseph Brusuelas, chief economist at consultancy RSM, said he believes inflation will continue to decline, “which will strengthen domestic household balance sheets and boost consumption in the coming year.”

Art Papas, the CEO of Bullhorn, a staffing and recruiting firm based in Boston, said “there is a lot of demand” among his clients – mid-market and large companies – as they anxiously wait for the green light for further hiring. and investments.

“It feels like we’re in a strange state of equilibrium,” he said, “that I’ve never seen before.”