Strong Jobs Growth Buoyed US Economy in December

The US economy struggled last month under the weight of the effects of rapidly rising prices, but job growth remained strong.

Employers created 223,000 new jobs in December, decreasing the unemployment rate from 3.6% in November to 3.5%.

The labor market’s resiliency has given rise to optimism that the largest economy in the world won’t see a severe slump this year.

In an effort to slow the economy and reduce pricing pressure, the US central bank is hiking borrowing costs.

Recent reports of significant job layoffs at banks and tech giants, such as Amazon, have attracted attention as businesses grapple with the effects of higher interest rates and the likelihood of weaker consumer spending.

However, the US Labor Department’s monthly report revealed that nearly every area of the economy was creating new employment, with hospitality, healthcare, and construction businesses all contributing to the growth.

According to Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has tracked such announcements since the 1990s, even if job losses are increasing—especially in the IT sector—the total figures stayed close to historic lows last year.

Jobs Growth Still Strong

Even if firms appear to be actively preparing for a slowdown, he added, the economy as a whole is still producing jobs.

Advertisement

Since 2021, when it surged with the epidemic reopening, the US economy has been rapidly slowing.

Higher borrowing costs are impacting businesses in industries like banking and real estate, and rising prices are putting pressure on household budgets, raising questions about consumer spending, which is the main engine of the US economy.

According to the most recent study, prices in the US increased 7.1% from a year earlier, which is much more than the healthy 2% pace.

The strength of the jobs market, according to analysts, makes the future unpredictable because the Federal Reserve may need to keep raising interest rates significantly if it wants to keep inflation under control.

According to Ronald Temple, Chief Market Strategist at Lazard, “the Fed cannot rest comfortably that inflation will return to its 2% target as long as the labor market stays this tight.”

The Labor Department reported that hourly wages increased 4.6% on average in December compared to the prior year. That was slower than in November, which analysts deemed encouraging for the effort to combat inflation.

For workers, who have not seen pay increases catch up with price increases, it was mixed news.

“The rise in consumer prices is outpacing the growth in worker pay, as budgets are put under strain because of this jobs report. It will be crucial to see how that equation plays out in the coming months, especially whether inflation pressures ease,” Mark Hamrick, a senior economist for Bankrate.com, said.

Advertisement

For More Economic News, Click Here.