US added 223K jobs in December, Unemployment at 3.5%

The monthly jobs report on December 2022 from the US Bureau of Labor Statistics showed continued strength in the labor market.

The economy added 223,000 jobs for December. That’s down from 263,000 in November, but caps off a year of growth in the job market, despite 40-year-high inflation and fears of a downturn. In all, payroll employment rose by 4.2 million in 2022, which is an average monthly gain of 375,000 jobs.

Unemployment edged down to 3.5%, keeping it in the historically low and narrow range of 3.5%-3.7% where it sat since March.

Average hourly earnings rose 0.3% or 4.6% for the year.

Job gains were driven by growth in leisure and hospitality, health care, construction, and social assistance. Retail trade employment remained essentially unchanged from the month prior.

It’s a sign that the tight job market of 2022 continued into the final month of the year. On Thursday, the Bureau also reported that job openings showed little change in November, staying at an elevated level of 10.5 million.

The job market is typically a primary indicator of consumer demand, as stable employment brings discretionary dollars. On the other hand, Federal Reserve officials say a cooling of the job market could be necessary to bring 40-year-high inflation all the way down to its 2% level. But there has been little evidence of that happening, even as the Fed keeps raising rates. December's report shows that jobs are still being added and unemployment ticked down, continuing the trend on view throughout 2022. While that's a welcome sign for retailers watching consumer demand, it will give the Fed more reason to keep its campaign of rising interest rates in place.

"On the one hand, the Fed appears on the verge of preventing labor market imbalances from widening further, which could be realized if employment growth slows more toward 100K, if not below," Bank of America economists wrote in a research note. "On the other hand, this just means labor market imbalances stop widening. Imbalances have yet to reverse."

Nonfarm payrolls, 2018-2022 (FRED)