Total nonfarm employment increased by 223,000, surpassing analysts’ expectations of 200,000 new positions. The unemployment rate declined from 3.7% in November to 3.5% in December.
Bankrate Senior Economic Analyst Mark Hamrick said in comments provided to The Daily Wire that the jobs report provides “a measure of reassurance regarding job security” as the labor market remains resilient despite recent economic turmoil. The sectors witnessing the most robust job gains included leisure and hospitality, healthcare, and construction. The report also showed that there exist roughly 10.5 million job openings and 5.7 million unemployed individuals, reflecting a constrained labor market that has worsened inflationary pressures as employers struggle to fill their payrolls.
Average hourly earnings accordingly rose 4.6% year-over-year, falling below the 5% estimate from analysts. Nominal wages have grown over the past two years but have increased at a slower rate than price levels, implying depressed purchasing power among households.
“Worker pay is failing to keep up with the rise in prices at the consumer level. This is a source of stress on household budgets,” Hamrick continued. “How that equation unfolds in the months ahead will be key, including whether inflation pressures relent.”
Policymakers at the Federal Reserve have closely examined unemployment rates as the central bank reverses nearly three years of aggressive monetary stimulus, including near-zero target federal funds rates and the purchase of government securities. Officials raised rates by three-quarters of a percentage point on four consecutive occasions before implementing a half-percent increase last month, causing higher interest rates across the economy.
“The collision of interests between so-called Wall Street and Main Street remains a conundrum for casual observers,” Hamrick said. “The Federal Reserve continues to look at the totality of employment data, including job openings, as contributing to inflation risk. This is among the reasons why Federal Reserve officials are sticking to their rate-raising guns, including the pledge to keep rates higher for longer.”
Members of the Federal Open Market Committee still believe efforts to achieve 2% inflation will take “some time,” as revealed by minutes from their meeting last month. “Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path,” a summary said. “In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy.”
Economists generally believe this year will see a recession in the United States, a reality that would follow one of the worst stock market performances in modern history last year, while others are more skeptical that a contraction will occur. Bank of America Chief Investment Strategist Michael Hartnett said in a report that a recession will strike in the first half of the year before markets attain a “much more solid footing,” while an outlook from Goldman Sachs Chief Economist Jan Hatzius noted that analysts at the company believe the economy will “stick a soft landing” and entirely avoid a recession.