[Asia Economy New York=Special Correspondent Joselgina] Despite the Federal Reserve's (Fed) consecutive interest rate hikes and recession concerns, additional indicators have been released showing that the labor market remains overheated. While private sector employment far exceeded market expectations, the number of Americans filing for unemployment benefits hit a 14-week low.
According to the ADP National Employment Report on the 5th (local time), private employment in U.S. companies increased by 235,000 in December compared to the previous month. This significantly surpassed the market forecast of 153,000.
While large companies reduced employment by 151,000, small and medium-sized enterprises significantly increased their workforce. Employment in companies with 50 to 449 employees rose by 191,000, and employment in small businesses with fewer than 49 employees increased by 195,000. By industry, the service sector (213,000) and leisure and hospitality sector (123,000) showed notable growth.
Meanwhile, the wage growth rate in December was 7.3% compared to the same month last year. Although it slowed compared to the previous month, it remains in the 7% range. The wage growth rate for private workers who quit their previous jobs and changed jobs was recorded at 15.2%.
The number of Americans filing for unemployment benefits also decreased. According to the weekly initial unemployment claims released by the U.S. Department of Labor on the same day, last week's claims totaled 204,000, down 19,000 from the previous week. This is the lowest level in the past 14 weeks and significantly below the market forecast of 220,000. The number of continuing unemployment claims, which are filed for at least two weeks, also decreased by 24,000 to 1.69 million compared to the previous week.
These indicators, suggesting that the labor market has not cooled down, are expected to strengthen the Fed's tightening stance in the new year. In the November Job Openings and Labor Turnover Survey (JOLTs) released the day before, the number of job openings in U.S. companies was 10.46 million, far exceeding the market forecast of 10 million. The ratio of job openings per unemployed person, which the Fed monitors to assess labor market overheating, remained unchanged at 1.7 from the previous month. This means there are 1.7 vacant jobs for every unemployed person.
For the Fed, which has been concerned about wage growth trends due to labor market overheating, this presents a deepening dilemma. Continued high wage increases inevitably exert upward pressure on inflation.
These indicators have drawn even more attention as they were released a day before the U.S. Department of Labor's December employment report, which the Fed closely watches. Currently, Wall Street's consensus for nonfarm payroll job growth is 200,000, slightly slowing from 263,000 in the previous month. The unemployment rate is expected to remain at 3.7%, the same as the previous month. Average hourly wages are forecasted to rise 5% year-over-year and 0.4% month-over-month.
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