The labor market closed the year strong.
Employers added 216,000 jobs in December on a seasonally adjusted basis, the Labor Department reported Friday, beating economists’ forecasts. It was the 36th consecutive month of gains.
In total, the U.S. economy added approximately 2.7 million jobs over the past year. That’s a smaller gain than in 2021 or 2022, during the economy’s initial resurgence from pandemic lockdowns. However, the gains in 2023 are still stronger than those of the late 2010s.
The figures are boosting expectations of what has been called a soft landing, in which the economy is able to avoid significant job losses while shifting into a calmer, more sustainable gear, after the disorienting volatility that began with the arrival of Covid-19 approximately four years ago. years ago.
Many experts warn that December data is notoriously difficult to calculate in any year because of the hiring turnover caused by the holiday season.
The unemployment rate, based on a household survey, remained unchanged at 3.7 percent.
Workers’ average hourly earnings, a common measure of wage gains, rose 0.4 percent from the previous month and 4.1 percent from December 2022, an unexpectedly strong increase that may help improve the workers’ confidence if inflation continues to decline.
Layoffs remain near historic lows, below pre-pandemic levels.
The resilience of employment and wage growth is even more notable in light of the Federal Reserve’s aggressive series of interest rate increases in recent years.
However, as always, threats to overly optimistic prospects abound.
Looking ahead to 2023, more than 90 percent of CEOs surveyed by the Conference Board said they expected a recession. The resilience of the economy has led many business leaders to readjust their overall expectations and, in many cases, their hiring plans. Some feel the full effect of those higher borrowing costs may still be lurking around the corner.
Kathy Bostjancic, chief economist at insurance giant Nationwide, projects the economy will experience at least a moderate recession this year.
“We are already seeing signs that cyclically sensitive sectors of the economy are significantly reducing the addition of workers to their payrolls,” he wrote in a note outlining his annual outlook. “We anticipate moderate job losses to occur in mid-2024. The unemployment rate should rise to around 5 percent later in 2024.”
Services such as health care, social assistance work, and state and local governments led job gains in December, but other previously hot sectors, such as transportation and warehousing, lost jobs or rose only slightly, a possible indicator of cooling .
And the workforce shrank by nearly 700,000 workers, according to the government survey. It was unpleasant news after steady workforce growth for much of 2023.
One tension over the past year has been the push and pull between continued improvement in overall data on the economy and household frustration over higher prices and other lingering pandemic shocks. For almost two years, inflation outpaced wage gains. However, that balance has changed in recent months and is expected to continue.
The closely watched University of Michigan Consumer Sentiment Index rose for much of the year, but in December it was still below what it has been 83 percent of the time since 1978, a period that has including shocks and depressions that, on paper, seem worse. .
That disconnect has hurt voters’ views of President Biden’s handling of the economy, polls show.
The geopolitical chaos has upended earlier predictions that inflation would fall as the economy remained stable and supply chains calmed. In 2022, the Russian invasion of Ukraine caused prices for oil and a wide range of food and energy products to skyrocket, sometimes doubling or more.
Last year there was largely a lull in new disruptions. But conflagrations in the Middle East have expanded since the fall, threatening key international trade routes. Maersk, the international shipping giant, 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 intensified in recent weeks.
As a result, the cost of shipping goods from Asia to northern Europe has increased by approximately 170 percent since December. For now, however, oil prices have been largely unaffected. And analysts on the optimistic side of the American economic debate largely remain adamant.
Joseph Brusuelas, chief economist at RSM, a consulting firm, says he believes inflation will continue to decline, “which will strengthen national household balance sheets and boost consumption in the coming year.”
Art Papas, CEO of Bullhorn, a Boston-based recruiting and staffing agency, said “there’s a lot of pent-up demand” among his clients — mid-sized and large companies — as they anxiously await the green light to make more hires. and investment.
“It feels like we’re in this strange state of balance,” he said, “that I’ve never seen before.”
