Nonfarm payrolls rose 223,000 (expected: 203,000) in December, leaving behind a near-record year for job growth. November data was revised to 256,000. With the increase in participation, the unemployment rate decreased by 0.1 percentage points to 3.5% (expected: 3.7%, November: revised to 3.6%).
Unemployment rate, seasonally adjusted, December 2019 – December 2022
If we look at the sub-items; Significant job gains occurred in entertainment and accommodation, healthcare, construction and outreach. The number of long-term job seekers (unemployed for 27 weeks or more) decreased by 146,000 to 1.1 million in December. Average hourly earnings increased 0.3% month-on-month (expected: 0.4%) and 4.6% versus December 2021, following a downward revision for November. This shows that there has been some easing in inflation pressures.
After the strong ADP data announced, a strong trend in the headlines stands out in the official data, and an unexpected decrease is observed in the unemployment rate. Rather than the current situation in the labor market, future reflections and calls will point to a declining employment momentum. Of course, the slowdown in the economy and the higher interest rate environment will be effective in this. It is not sustainable for businesses to slow down employment growth or to reduce the unemployment rate further within the framework of existing employment reduction plans. As the Fed slows down inflation, the unemployment rate will increase, as it will slow down the economy.
If we look at the Fed’s point of view; There is no clear guidance from this data set. The slowdown in wages is likely welcome news, especially for the Fed, which sees wage pressures in the services sector as a major obstacle to reaching its 2% inflation target. Peak interest is still more likely to be above 5% in 2023.
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