The US Department of Labor announced on Friday (6th) that the number of new non-agricultural jobs in December last year was 223,000, which exceeded market expectations of 200,000, and the previous value was revised to 256,000. The unemployment rate for the month was 3.5%, lower than The market expected 3.7%, the previous value was revised down to 3.6%. In addition, the growth rate of average hourly earnings slowed last month, which was below market expectations.
Although the number of new non-agricultural jobs in December last year was higher than expected, it was a new low since December 2020. The previous value was revised down from 263,000 to 256,000. This is the lowest level since August 2010, avoiding the possibility of a recession in the near future while giving the Federal Reserve (Fed) room to slow rate increases.
December nonfarm payrolls report:
- Non-farm new employment reported 223,000, expected 200,000, and a revised prior of 256,000
- The unemployment rate was reported at 3.5%, expected at 3.7%, and a revised previous value of 3.6%
- Average working week 34.3 hours, expected 34.4 hours, previous value 34.4 hours
- Annual growth in average hourly earnings was reported at 4.6%, compared to 5.0% expected and 4.8% previously
- Hourly wages rose an average of 0.3% monthly, compared with an expected 0.4% and 0.4% previously
- Labor participation rate reported at 62.3%, expected 62.2%, revised previous value of 62.2%
Employment rose the most in service industries such as leisure and hospitality and healthcare in December, while employment in retail and transport and warehousing was little changed.
It is worth noting that wage inflation cooled significantly in December last year. The average hourly increase was only 0.3% monthly, which was below the market expectation of 0.4% The previous value was 4.8% after the review, which is the lowest since then. August 2021.
Signs of slowing wage growth could ease the Fed’s hawkish stance, as the December Federal Open Market Committee (FOMC) minutes highlighted the strong relationship between wages and inflation in non-core services.
Some analysts noted that future wage growth will be the key to the Fed’s next move. The US Treasury yield curve could remain inverted longer than expected if the job market holds up well later this year and the economy does not collapse.
Unemployment is falling, labor force participation is increasing
The unemployment rate unexpectedly fell to 3.5% in December last year, below the expected 3.7% and the revised previous value of 3.6%, the lowest since September last year. The unemployment rate has been in a tight range of 3.5% to 3.7% since last March. In addition, the underemployment rate also fell significantly, from 6.7% to 6.5%, writing the lowest level ever.
However, the labor force participation rate rose unexpectedly, rising to 62.3% in December last year, higher than the 62.2% expected by the market, and the previous value was 62.1%. UBS previously noted that the return of immigrants would increase the labor supply and thus the labor force participation rate.
expert opinion
Vanda analyst Viraj Patel pointed out that wage growth is temporary Strong job growth and increased job supply (the rising labor force participation rate) are unlikely to change the Fed’s path, but lower wages give them time to slow increases in the rate.
Bloomberg economists Anna Wong and Eliza Winger said December’s nonfarm payrolls report appeared to be the result of Goldilocks: Labor force expansion and strong hiring pushed the unemployment rate down, but wage growth also moderated; Labor market conditions may be picking up again after easing somewhat late last year.
Wall Street Journal (WSJ) reporter Nick Timiraos, known as the Fed’s megaphone, said the revised average hourly earnings data showed the Fed was slightly less concerned about wages than it reported in November. Average hourly earnings in November were revised down to 0.4% month on month from 0.6%. In addition, the average hourly wage growth rate of 4.6 in December last year was the lowest since August 21 last year.
Responding to the Market
After the report was released, major US stock indexes rose. Before the deadline, the Dow Jones Industrial Average rose more than 370 points or nearly 1.1%, the Nasdaq Composite Index rose nearly 90 points or nearly 0.9 %, namely the S&P 500 Index rose almost 1.1%, and the Philadelphia Semiconductor index rose almost 1.5 percent.
According to the CME Group’s FedWatch Tool, the probability that the Fed will raise interest rates by 1 yard (25 basis points) in February is 76.2%, and the probability of raising interest rates by 2 yards (50 basis points) is 23.8 %. range.
