American Job Market Stays Hot, 223,000 Jobs Added In December As Unemployment Falls

American Job Market Stays Hot, 223,000 Jobs Added In December As Unemployment Falls

unemployment falls

An autoworker works on a Chevrolet Volt at General Motors, Hamtramck, Mich., July 27, 2011. (AP Photo/Paul Sancya)

The U.S. added 223,000 jobs in December, finishing out a strong year for the labor market while the unemployment rate fell back to a 50-year low. Some economists and market watchers say this is a sign that the economy is holding its own despite warnings and fears of an imminent recession. Others say wage growth hasn’t kept up, pointing out that the weakening of a key manufacturing index shows a recession is a matter of when, not if.

To try and slow inflation, the Federal Reserve raised interest rates seven times and 4.25 percentage points in 2022 with more rate hikes expected. While job growth has moderated, the labor market remains resilient. However, the Fed is worried that a greater demand than supply for/of workers will cause wages to rise in a way it views as unsustainable, stoking inflation.

The Labor Department reported on Friday, Jan. 6 that the overall unemployment rate went down to 3.5 percent in December. However, that rate was even lower for some than others.

White unemployment fell to 3 percent in December but the unemployment rate was 5.7 percent for Black people, highlighting ongoing discrepancies in the job market. By comparison, the unemployment rate was 2.4 percent for Asians and 4.1 percent for Hispanics.

The unemployment rate fell from 3.7-to-3.5 percent, matching a 50-year low. The U.S. added 4.5 million jobs in 2022, the second most after the 6.7 million jobs gained in 2021 as the country recovered from record job losses in the 2020 onset of the covid pandemic.

Average hourly wages rose 9 cents in December to $32.82. As of November, there were about 1.7 job openings for every available worker, an imbalance that is holding despite the Fed’s rate hikes. The strong demand has pushed wages higher, but they haven’t kept up with inflation.

A key indicator of the state of the U.S. economy, the ISM manufacturing index or purchasing managers’ index indicates the level of demand for products by measuring the amount of ordering activity at U.S. factories. And it’s not looking good.

The ISM is signaling recession for the first time in 30 months, according to MishTalk, a global economics blog written by Mike “Mish” Shedlock, a registered investment advisor for SitkaPacific Capital Management.

When the ISM Manufacturing PMI number is above 50, it indicates manufacturing is expanding, which means the economy is growing and stocks will most likely increase in value, according to Learning Markets. If the number is below 50, it indicates that manufacturing is contracting, which means the economy is contracting and stocks will most likely decrease in value.

The ISM manufacturing index contracted in December for the second consecutive month with the lowest reading since May 2020, Shedlock wrote, citing the December 2022 Manufacturing ISM Report On Business.

The index registered 48.4 percent, 0.6 percentage points lower than the 49 percent recorded in November.

“It’s clear what’s happening to manufacturing,” Shedlock wrote. “Notably, prices have collapsed.”

In another less optimistic note, Supply Management’s survey of service industry activity plunged in December, to 49.6 percent — down from 56.5 percent in November, Axios reported. This is the first time the index has been in negative territory since May 2020.