The U.S. economy filled 233,000 more jobs last month, dropping the unemployment rate from 3.6 percent to a 53-year low of 3.5 percent.
The number of new jobs was the smallest added in two years, providing additional evidence that the jobs market is cooling as the U.S. Federal Reserve raises interest rates, inflation continues briskly, and the economy slows.
The healthcare industry added 74,000 workers, leisure and hospitality 67,000, retailers took on 9,000 more employees, and construction firms 28,000, a surprisingly large expansion at a time when high-interest rates have bogged down the building industry.
About 80 percent of people taking new jobs in December took part-time work, according to research by Comerica Bank.
“That trend suggests that as inflation began to accelerate, some people took second jobs to help keep up with rising costs,” the Associated Press noted.
The labor participation rate, measuring the number of people working or actively looking for a job, ticked up to 62.3 percent last month. More people were looking for work, and it was very possible to find second jobs to meet the rising costs of living.
Wages added 4.6 percent last month, continuing their slowdown from March’s peak pace of 5.6 percent.
Meanwhile, the average work week shrank to 34.3 hours, the shortest since early 2020 when the COVID virus was taking hold.
TREND FORECAST: As we detail in this week’s ECONOMIC OVERVIEW, the employment sector in terms of wages and employment will worsen in 2023. Wages will go down relative to inflation and employment numbers will go up. And it should be noted that many of the new jobs were second, temporary jobs, which pay lower wages.
And while there are more people working these jobs, service sector employment slid by 111,000 since 1 August, the WSJ reported, a possible sign that employers are dispensing with temporary help and cutting employees’ hours to forestall layoffs, the WSJ speculated.
Amazon announced plans to lop off at least 18,000 workers, Salesforce will dump 10 percent of its workforce, and other tech-dependent companies, including DoorDash, Meta, and Snap, already have turfed out tens of thousands of employees over recent months. Goldman Sachs will dump about 3,200 workers, more than 1,000 from its core banking and investment divisions. (See “WHEN THE ECONOMY FALLS JOBS GO WITH IT.”)
New factory orders slumped by 1.8 percent in November, the U.S. Commerce Department reported. December was the second consecutive month of slower orders, following 29 months of growth, and business in the services sector contracted for the first time in 30 months.
The slowdown in both hiring and wage growth has fueled speculation that the Fed will hold its next interest rate increase to a quarter-point instead of the half-point hikes that marked four of the bank’s rate bumps last year.
At this time, with so many wild cards such as the fear of ramping up of the COVID War with the new variant that is spreading fear through society, the Ukraine War intensifying and our 2023 Top Trend, “Middle East Meltdown” heating up… it is a guessing game as to where Fed rates are headed.