After months of reports that sent mixed signals, with the establishment survey showing rapid job growth and the household survey showing declines, the December Jobs Report finally has a resoundingly consistent message: the labor market was robust and resilient in 2022.
Nonfarm payrolls rose 223K, and the employment level in the household survey jumped a massive 717K, with 439K people joining the labor force. Over the year, nonfarm payrolls rose 4.5 million, and the employment level rose 3.2 million. At the same time, the unemployment rate fell back down to 3.5%, tying with the lowest rate in 50 years.
The report also includes data on wage growth that is likely to make the Fed smile. Last month’s report showed a large spike in wage growth and set off investor fears of an impending wage-price spiral, but the December report suggests the November reading was an anomaly. The 3-month moving average increase in wages, annualized, came in at a scorching 5.8% in last month’s report, but with revisions to the last two months of data, the November reading is just 4.4%, and December’s is even lower at 4.0%. San Francisco Fed President Mary Daly has said that the Fed believes wage growth in the 3.5%-4% range would be consistent with its inflation target of 2%, so today’s report showing moderating wage growth should calm markets and assure the Fed.