Even as the economy grappled with the effects of rapidly rising prices, jobs growth in the US remained robust last month.
In December, 223,000 jobs were added, bringing the unemployment rate down to 3.5% from 3.6% in November.
The resiliency of the labor market has bolstered expectations that the largest economy in the world will avoid a major economic crisis this year.
The US central bank is increasing interest rates to calm the economy and reduce price pressures.
The recent news of significant job layoffs at banks and technology companies. Such as Amazon, has garnered attention as businesses grapple with the effects of increased interest rates and the likelihood of decreased consumer spending.
However, according to a monthly report from the US Department of Labor. Nearly every sector of the economy is creating jobs, with bars and restaurants, healthcare companies, and construction industries driving the gains.
Andrew Challenger, senior vice president at Challenger, Gray & Christmas. Which has tracked such announcements since the 1990s, stated that despite a rise in layoffs. Particularly in the technology industry — the figures remained near historic lows last year.
“The economy as a whole is still adding employment. But firms appear to be actively preparing for a recession,” he said.
Since 2021, when it surged with the pandemic’s outbreak, the U.S. economy has declined considerably.
Higher borrowing costs are impacting businesses in sectors. Such as real estate and finance while rising prices are straining household budgets. And creating concerns about consumer spending – the largest generator of the US economy.
The most recent study revealed that prices in the United States rose 7.1% from one year ago. Which is significantly faster than the healthy pace of 2%.
According to analysts, the strength of the labor market makes the future unpredictable. Because the Federal Reserve may need to continue with significant interest rate hikes if it intends to curb inflation.
As long as the labor market is as tight as it is. The Fed cannot be certain that inflation will return to its 2% target. According to Lazard’s senior market analyst, Ronald Temple.
The average hourly wage increased by 4.6% in December compared to the same month the previous year. According to the Labor Department. That was a slower rate than in November. Which was viewed as an encouraging sign for the fight against inflation by analysts.
However, the news was mixed for workers, whose salary increases have not kept pace with inflation.
“The remuneration of workers is not keeping pace with the rise in consumer costs. This causes strain on household finances. How this equation plays out in the next months, including whether inflationary pressures ease, will be crucial “Mark Hamrick. Senior economic analyst at Bankrate.com, stated as much.
