Another month, another set of stronger than expected jobs numbers. Nonfarm payroll was up by 223,000 in December and unemployment dropped to 3.5%. And then, average weekly earnings in December hit $32.82, for 4.6% year-over-year growth.
Leisure and hospitality (+67,000) had one of the big industry increases, with food services and drinking places up 26,000; amusements, gambling, and recreation increasing by 25,000; and accommodation jumping by 10,000. Healthcare rose by 55,000, split by ambulatory services (+30,000), hospitals (+16,000), and residential care (+9,000). Construction grew by 28,000, of which 17,000 were in specialty trade contractors. Retail saw 9,000 more workers.
All this will offer the Federal Reserve more reasons to keep increasing the benchmark federal funds rate until that benchmark is well above 5% and short-term financing for construction, bridge loans, and all adjustable rate loans increases over its already much higher costs.
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"At the end of the year, job markets signaled continued resilience," noted Realtor.com Senior Economist George Ratiu in an emailed statement. "A separate report this week indicated that there were 10.5 million open positions in November, a sign that many companies are still struggling to find qualified candidates. At the same time, over 4 million people quit their jobs during the month, looking for better employment."
Don't bet on wage growth slowing down yet. "In all industries, employers must keep an eye on their wages and flexible work offerings to ensure they don't lose valuable employees," said Becky Frankiewicz, president and chief commercial officer of ManpowerGroup.
"Employees who leave existing jobs for new opportunities are receiving an average salary increase of 15.1%, while those who stay in their existing positions are receiving salary increases of 7.6%. Companies are also 'labor hoarding,' often due to the desire to avoid past challenges of time-consuming pandemic hiring."
"While the easing of wage pressures may initially be cheered by markets, workers are still not keeping up with inflation, therefore pressuring consumption trends," said John Lynch, chief investment officer for Comerica Wealth Management, in another emailed note. "This report should add to investor confusion and heighten market volatility in the weeks ahead. It also complicates the Fed's battle against inflation, though the minutes from the December monetary policy meeting reiterate the committee's resolve. A 50-basis point move is back on the table for the next FOMC meeting in a few weeks."
Lynch and Comerica are betting on a fed funds rates in the 5.25% to 5.50% range in the near future. Given the employment report, that seems a reasonable bet.
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