United States: Job creations exceed expectations in December

by Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy added more jobs than expected in December, pushing the jobless rate down to 3.5%, but the Federal Reserve’s rate hike could cause that momentum to slow significantly by the middle of the year.

The Labor Department on Friday reported 223,000 nonfarm payrolls created last month and revised the November figure down to 256,000 from 263,000 originally reported.

Economists polled by Reuters predicted an average of 200,000 job creations in December, with their estimates ranging between 130,000 and 350,000.

The report from the Department of Labor also shows that the increase in the average hourly wage slowed to 0.3% in December after +0.4%, which brings its increase over one year to 4.6%. The Reuters consensus was for an increase of 5.0% year on year.

The unemployment rate fell to 3.5% from 3.6% (revised) the previous month.

The job market remains under pressure despite the vigorous tightening of the Fed’s monetary policy initiated last March. In the face of soaring prices, the central bank raised the federal funds rate target by 425 basis points, making its fastest rise since the 1980s. rates, like that of technology, are reducing their workforce, airline and hotel and restaurant companies have been looking for arms since the COVID-19 pandemic.

The resilience of the labor market, by supporting consumer spending, increases the likelihood that the Fed will raise and for a time maintain its rate target above 5.1%, the median of central bank officials’ forecasts.

However, employment momentum could weaken considerably between now and mid-year, as the high cost of credit weighs on consumer spending and, ultimately, business investment.

(French version Laetitia Volga, edited by Blandine Hénault)

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