[Asia Economy New York=Special Correspondent Joselgina] Despite the Federal Reserve's (Fed) consecutive interest rate hikes and recession concerns, indicators show that the labor market overheating continues day after day. The unemployment rate in December last year fell to 3.5%, the lowest level in decades, and the increase in nonfarm payrolls far exceeded market expectations. However, the wage growth, which the Fed has been concerned about, appeared to have somewhat slowed down.
According to the employment report released by the U.S. Department of Labor on the 6th (local time), nonfarm payrolls increased by 223,000 last month. Although this is less than the previous month's increase of 256,000, it far exceeds the market forecast of 200,000. This confirms that the labor market remains strong. By sector, job growth was significant in leisure and hospitality (67,000), healthcare (55,000), and construction (28,000).
Along with this, the unemployment rate fell from 3.6% (adjusted) in November to 3.5% in December. This is the lowest level since the late 1960s. The labor force participation rate rose slightly to 62.3% compared to the previous month but remained 1.0 percentage point lower than before the pandemic (global outbreak).
However, wage growth, which is directly linked to inflation concerns, has somewhat eased. This is a somewhat reassuring aspect for the Fed, which has been struggling with strong employment data recently. The average hourly wage in December rose by 0.3% from the previous month and 4.6% year-over-year. The initial market forecasts were 0.4% and 5.0%, respectively, so the actual figures fell short. The year-over-year wage growth rate slowed to the lowest level since the summer of 2021.
There are also opinions that this report will not immediately lead to significant changes in the Fed's monetary policy decisions, as the overall labor market overheating is still confirmed. Employment data released since the new year all support this labor market overheating.
According to the national employment report by private employment firm ADP released the day before, private employment in U.S. companies increased by 235,000 in December last year compared to the previous month, greatly exceeding the forecast of 153,000. The number of Americans filing for unemployment benefits also hit a 14-week low. Last week's new unemployment claims decreased by 19,000 from the previous week to 204,000, far below market expectations.
Michael Schumacher, Head of Strategy at Wells Fargo Securities, said, "It will not bring a major change in the Fed's view," but evaluated that "the wage growth rate is positive for the Fed." Speeches by Fed Board member Lisa Cook, Raphael Bostic, President of the Atlanta Federal Reserve Bank, Thomas Barkin, President of the Richmond Fed, and Esther George, President of the Kansas City Fed, are scheduled for the day.
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