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BLS Jobs: 223K, 3.5% Unemployment Strong, Wage Growth Down

Friday, January 6th, 2023

The latest monthly non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) is out this morning: 223K new jobs were created in December, more than the 200K estimated but below the downwardly revised 256K the previous month. The Unemployment Rate came down to 3.5% from 3.7% the previous two months. This means we are officially back down to pre-pandemic levels on unemployment.

Fed decision be damned — this is good news! We appear to still be adjusting overall labor force from pandemic conditions, which would explain the insistent robustness in monthly jobs gains. But while this only will firm the Fed’s mindset on a 5% Fed funds rate going forward, at least the American workforce is not falling off a cliff. In fact, just the opposite: our pre-Covid unemployment rate was historically good -- the best since 1969! -- and now we’re right back to where we were. Not too shabby.

Average Hourly Earnings came in notably cooler than expected: +0.3% from +0.4%, with November’s high +0.6% now revised down to +0.4%, with October’s revision lower as well. Year over year, this figure is +4.6%, a low we haven’t seen since August 2021. With persistently strong monthly job gains, the fear is wages will heat up too fast and promote more inflation. But this is proving to be cooling down a bit — a “Goldilocks” item in this current slew of data.

That said, +4.6% wage growth year over year is clearly lower than current year-over-year inflation. Thus, a large percentage of this strong workforce isn’t seeing its earnings go as far, which promotes recessionary conditions — at least with a certain class of workforce. We saw in yesterday’s ADP ADP report that workers who move to new jobs averaged a +15% gain in income last month; certain markets, like tech, are outperforming others, like manufacturing.

Tech, by the way, only makes up 2% of the total U.S. workforce. There are roughly 3 million tech workers of the 154 million total employees in this country, much lower than the 15.5 million in Leisure/Hospitality (which led the way again last month with 67K new hires) and 21.5 million in Government. So when we expect big layoffs in major tech companies to show up in monthly jobs data, this is why they may be hard to see.

Labor Force Participation grew to 62.3% from 62.1%. This is still historically low (though, again, consider post-Covid situations of early retirement, etc. as anomalies), but going in the right direction. Increased participation among able-bodied Americans entering the workforce is a positive development on many levels — let’s see more of that in the jobs reports to come.

The figure on long-term unemployed Americans has nearly been cut in half over the past year: 1.1 million versus 2 million before. Again, we consider labor adjustments across a plethora of industries to still be grappling with pandemic/post-pandemic issues (including companies doing a lot of business in China, for instance), so we might not be looking at “normal” employment conditions. But as long as we can see inflation metrics continue coming down everywhere, the longer we have a good labor market, the better chance the economy has of reaching a “soft landing.”

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