The job market ended the year on a high note.
Employers added 216,000 jobs in December on a seasonally adjusted basis, the Labor Department reported Friday, beating economists’ forecasts. This is the 36th consecutive month of increase.
In total, the U.S. economy added about 2.7 million jobs over the last year. This is a smaller gain than in 2021 or 2022, during the first resurgence of the economy after the pandemic lockdowns. However, the gains in 2023 remain greater than those of the late 2010s.
These figures reinforce expectations of what is known as a soft landing – in which the economy will be able to avoid significant job losses while shifting to a calmer, more sustainable gear, after the disorienting volatility which began with the arrival of Covid-19 about four years ago. years ago.
Many experts caution that December data is notoriously difficult to calculate for any year because of the hiring churn 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% from the previous month and 4.1% from December 2022, a surprisingly strong increase that could help improve worker confidence. workers if inflation continues to slow.
Layoffs remain near their lowest levels, below pre-pandemic levels.
The resilience of employment 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 as always, there are many threats to overly optimistic outlooks.
Heading into 2023, more than 90% of business executives surveyed by the Conference Board said they expected a recession. The resilient economy has prompted many business leaders to readjust their overall expectations and, in many cases, their hiring plans. Some believe that the effects of this increase in borrowing costs could still be felt.
Kathy Bostjancic, chief economist at insurance giant Nationwide, predicts the economy will experience at least a moderate recession this year.
“We are already seeing signs that sectors of the economy sensitive to business cycles are significantly forgoing adding workers to their payrolls,” she wrote in a note describing her annual outlook. “We expect moderate job losses through mid-2024. The unemployment rate is expected to reach around 5 percent by 2024.”
Services like health care, welfare, and state and local government led the way in job gains in December, but other previously hot sectors, like transportation and warehousing, either lost jobs or increased only slightly, a possible indicator of a cooling.
And the labor force declined by nearly 700,000 workers, according to the government survey. This was bad news after steady growth in the labor force through much of 2023.
One tension over the past year has been the tug between continued improvement in overall data on the economy and household frustration over rising prices and other lingering shocks from the pandemic. For almost two years, inflation has outpaced wage gains. However, this balance has changed in recent months and is expected to continue.
The closely watched University of Michigan Consumer Confidence Index has been climbing for much of the year, but in December it was still below 83% of the time since 1978, a period that saw shocks and recessions that, on paper, seem worse. .
That disconnect has hurt voters’ views of President Biden’s handling of the economy, polls show.
The geopolitical chaos prompted earlier predictions that inflation would fail as the economy remained stable and supply chains calmed. In 2022, the Russian invasion of Ukraine caused the prices of oil and a wide range of food and energy products to skyrocket, at times doubling or more.
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 shipping goods from Asia to Northern Europe has increased by about 170 percent since December. But for now, oil prices have remained largely unchanged. And optimistic analysts of the American economic debate largely remain faithful to their positions.
Joseph Brusuelas, chief economist at RSM, a consulting firm, said he believes inflation will continue to slow, “which will strengthen domestic household balance sheets and boost consumption in the year ahead.”
Art Papas, chief executive of Bullhorn, a Boston-based staffing and recruiting agency, said “there’s a lot of pent-up demand” among his clients – mid-sized and large companies – as they eagerly await 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.”