The U.S. job market ended 2023 strong, creating more jobs than experts expected and bolstering hopes that the economy can settle into a solid, sustainable level of growth rather than sinking. in a recession.
Employers created 216,000 jobs in December on a seasonally adjusted basis, the Labor Department reported Friday. The unemployment rate remained unchanged at 3.7 percent.
Although hiring has slowed in recent months, layoffs remain near record lows. The sustainability of hiring and wage gains is all the more remarkable in light of the Federal Reserve’s aggressive series of interest rate hikes over the past two years. But several analysts warn that the line is not yet clear and that the effects of these higher rates will take time to trickle down to business activity.
“The real test for the job market begins now, and so far it passes the test,” said Daniel Altman, chief economist at Instawork, a digital platform that connects employers and job seekers .
Financial commentary over the past year has been dominated by conflicting narratives about the economy. Most economists have warned that raising borrowing costs by the Fed at a historically rapid pace would send the economy into a slowdown. Heading into 2023, more than 90% of business executives surveyed by the Conference Board said they expected a recession. And many leading analysts believed that price increases could only subside if workers suffered significant job losses.
But the resilience of the global economy and consumer spending has so far defied this outlook: as of June 2022, inflation was around 9%. Inflation has since fallen to 3 percent while the unemployment rate has remained largely unchanged.
In total, the U.S. economy added about 2.7 million jobs over the past year. This is a smaller gain than 2021 or 2022. Still, the 2023 increase was larger than that of the late 2010s and represented the fifth strongest year in terms of growth in employment since 2000.
Nonetheless, the report suggests that the landing could still be bumpy.
Services like health care, welfare, and state and local governments led the way in job gains in December, but previously hot sectors like transportation and warehousing either lost jobs or n have only increased slightly.
The overall labor force — the ranks of those currently working or looking for work — declined by nearly 700,000 workers, according to December data. This was bad news after steady growth in the labor force through much of 2023.
Separately, the figures for October and November were revised downward by 71,000. This leaves the average monthly increase in employment in the final quarter of 2023 at around 165,000, down from around 221,000 in the third quarter and 201,000 in the second quarter.
Omair Sharif, founder of data analytics firm Inflation Insights, said in a note to subscribers that the December figure represented “a healthy gain” but added that “hiring has clearly slowed.”
As an election year approaches, the employment situation also has a political dimension.
President Biden, whose handling of the economy has resulted in poor ratings in voter polls, announced the December numbers. “Strong job creation continued even as inflation fell,” he said in a statement, while noting that prices remain a concern for many in the country.
The closely watched University of Michigan consumer confidence index was lower in December than it has been 83% of the time since 1978, a period that has been marked by shocks and recessions that , on paper, seem worse than today. The index has been climbing for much of last year, however, and several factors may have contributed to more optimistic perceptions.
After nearly two years in which inflation outpaced wage gains, that balance has shifted in recent months. The average hourly wage of workers increased by 0.4 percent in December compared to the previous month and by 4.1 percent compared to December 2022.
The real estate market, frozen by rising interest rates, is a source of frustration for ambitious first-time home buyers. But for those who own their homes – about two-thirds of American households – the average rate on all outstanding mortgage debt is just 3.7%, protecting them from higher housing costs.
Although many families have struggled since 2021, falling back into poverty as the federal aid network associated with the pandemic response has faded, the share of household disposable income devoted to debt repayment is below its pre-pandemic level, a sign of overall good consumer health.
Annie Wharton, a 56-year-old art consultant in Los Angeles, enjoys the financial stability that many middle-class and more affluent Americans have been able to manage despite the dizziness of the 2020s.
Art is a sector that “has always had challenges,” Ms. Wharton said. “But I’m happy to say it’s been a good year.”
His office obtained a loan from the Department of Commerce under the Paycheck Protection Program, a key part of the government’s pandemic relief effort, which allowed him to keep his small staff fully employed throughout throughout his mandate.
Things have slowed down “with an uncertain economic outlook,” she added, saying that “people seem more cautious than usual” and “everyone is thinking twice before buying.” But she remains optimistic.
Once again, the greatest uncertainties could come from abroad.
In 2022, as global supply chain disruptions eased, the Russian invasion of Ukraine caused the price of oil and a wide range of food and energy products to skyrocket, sometimes doubling or the higher their price, leading to further inflation.
The last year has largely marked a lull in new disruptions. But conflicts in the Middle East have expanded since the fall, threatening key international trade routes. Maersk, the international shipping giant, has announced that for the near future it will keep container ships out of the Red Sea, where drone and missile attacks on merchant ships have increased in recent years. recent weeks.
As a result, the cost of transporting goods from Asia to Northern Europe has increased by about 170 percent since December, according to Bloomberg analysts who track global trade. Oil and gas prices, which have fallen significantly since the early stages of the Ukraine war, have been largely unaffected by the latest disruptions, but more prolonged disruptions could be felt by U.S. consumers under the form of an increase in the prices of energy and goods.
Kathy Bostjancic, chief economist at insurance giant Nationwide, predicts that the economy will experience at least a moderate recession this year, with the unemployment rate reaching 5 percent.
But optimistic analysts of the national economic debate largely stick to their views.
Joseph Brusuelas, chief economist at RSM, a consultancy, expects inflation to continue to slow, “which will strengthen domestic household balance sheets and boost consumption in the year ahead.”
Art Papas, chief executive of Bullhorn, a software provider for staffing and recruitment agencies, says “there is a lot of pent-up demand” among his clients – medium and large businesses – as they wait with bated breath the green light for new hires. and investment.
“It’s like we’re in this strange state of balance,” he said, “that I’ve never seen before.”
Santul Nerkar reports contributed.
