The latest jobs report is in, and once again it's looking good for workers: The U.S. economy added 223,000 jobs in December, and unemployment dropped to 3.5 percent from 3.6 percent, according to the latest numbers from the Bureau of Labor Statistics.
The gains cap off a strong year for the job market. Employers added 4.5 million positions in 2022, which is the second-best year since 1940 after 2021. The job growth held strong throughout the year despite an onslaught of Federal Reserve rate hikes aimed directly at lowering employment.
Fed Chair Jerome Powell recently stressed that the cost of services (as opposed to durable goods) will need to come down to tame inflation, and that services are more closely tied to wage and job growth. Translation: The Fed plans to raise rates until they raise the unemployment level.
However, the December report shows wage growth slowing, even as unemployment drops, and some economists are now arguing that a so-called "soft landing" is more likely.
"Today's payrolls report was nirvana for the bulls," said David Russell, vice president of market intelligence at TradeStation Group. "The Fed's latest worry has been the wage-price spiral, but this report shows just the opposite. Forget about glass half full. It could be more like three-quarters full. We could be looking right now at a soft landing."
Average hourly earnings were up 0.3 percent in December from the month before, down from a 0.4 percent increase in November. Wages were up 4.6 percent for the year, which is down significantly from a peak of 8.6 percent year-over-year in March.
Leisure and hospitality contributed the biggest share by sector to the job gains with 67,000 new positions. Health care added 55,000, and construction added 28,000 positions.
The labor participation rate, which tracks the number of working-age adults who are actively seeking employment, ticked up to 62.3 percent in December from 62.2 percent the month before.
The federal jobs report finishes a week of mixed signals from the jobs market. While aggregate numbers remain strong, a series of high-profile layoffs in the tech sector stoked fears that the economy overall is losing momentum and could be headed for a recession.