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The job market was on a hot streak for much of 2022, but chilly winds are blowing

STEVE INSKEEP, HOST:

The U.S. job market improved at the end of the year. We've got new job numbers out this morning. So let's bring in NPR business correspondent Scott Horsley. Hey there, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: What do the numbers show you?

HORSLEY: It was another solid month of job gains in December. U.S. employers added 223,000 jobs last month. That's down just slightly from the two previous months. And the unemployment rate actually inched down to 3.5%, matching the lowest level in half a century...

INSKEEP: Wow.

HORSLEY: ...Even though more than 400,000 people came off the sidelines last month and started working or looking for work. Now, the Federal Reserve has been deliberately trying to hit the brakes by raising interest rates to curb inflation. But Dave Gilbertson, who's with the time sheet tracking company UKG, says the jobs engine just keeps chugging along.

DAVE GILBERTSON: To me, the big headline in the labor market from 2022 as a whole - it's been just a remarkable calm. The labor market's been this calm eye in the center of the storm.

HORSLEY: If you tally up all of 2022, the economy added 4 1/2 million jobs, which is a really strong showing. And it was more than enough to fill in that big hole in the job market that was left when the pandemic started two years ago.

INSKEEP: Does this mean the increase in interest rates, at least so far, have hardly affected the job market at all?

HORSLEY: It is having some effect, but it's definitely muted. For example, we know there's been a slowdown in the housing market, but construction companies still added 28,000 jobs last month. There has been some slowdown in the financial sector, also manufacturing. Factories added 8,000 jobs last month, but that's only about a quarter of what we saw on average during last year. One place we're definitely seeing a slowdown is in temporary services, which is sometimes a bellwether of what might be in store in the months to come. Businesses that supply temporary workers cut 35,000 jobs last month. Businesses are definitely on the lookout for a possible recession on the horizon. And as a result, Gilbertson says, some employers are getting more cautious about adding workers to their payroll.

GILBERTSON: They're kind of pumping the brakes a little bit on hiring, keeping the employees they've got because they don't want to be in a bind if things actually do continue. But they are starting to, again, let some air out of the tire when it comes to the amount of overtime that's being offered or the total number of shifts that are being offered.

HORSLEY: The Federal Reserve would actually welcome some softening in the job market, especially if it helps to keep a lid on wages. The central bank is concerned that rapidly rising wages could put more upward pressure on inflation. Last month, the average hourly wage was 4.6% higher than a year ago, which is a slightly smaller annual increase than we saw the month before.

INSKEEP: Wages still going up, though not as quickly as inflation, we should note. We should also note that the anecdotal evidence of job slowdowns is there - 18,000 workers to be laid off at Amazon, 7,000 jobs to be eliminated at Salesforce. What do you make of that?

HORSLEY: Yeah, those numbers grab the headlines for sure. And for those affected workers, it's obviously a big disruption. But so far, when we look at the economy as a whole, we're not seeing evidence of really widespread job cuts. New claims for unemployment benefits, which are kind of a proxy for layoffs, remain at historically low levels. Nela Richardson, who's the chief economist at the payroll processing company ADP, says the businesses that are cutting large numbers of workers, like Amazon, are typically companies that grew really fast over the last couple of years.

NELA RICHARDSON: These firms benefited from a pandemic economy where people were at home. They were hungry for the Internet and hungry for devices. Now we're coming to a point where consumer spending has shifted again. Tech is responding by pulling back.

HORSLEY: Other employers, though, say even if their business slows down, they're going to be reluctant to let people go because it's been such a challenge over the last couple of years to find workers.

INSKEEP: Well, that's true. Scott, thanks so much. Really appreciate it.

HORSLEY: You're welcome.

INSKEEP: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.