After a year of economic turbulence, the United States’ job market managed to close out 2022 on a positive note with strong figures. On Friday the Department of Labor reported that 223,000 new jobs were added in December, exceeding experts’ predictions of 200,000.
This was positive reading for the White House, as was the news that the unemployment rate had fallen to 3.5%. This represents a long-awaited return to pre-pandemic levels.
Hiring undoubtedly cooled during 2022 from a high of 539,000 new jobs per month in the first quarter of the year. But this is to be expected as the US moves further away from the huge spike in unemployment at the start of the pandemic.
Across the year, 4.5 million new jobs were added. This is the second highest number ever recorded, behind only 2021 in the rankings. However there is still a lot of work to be done to make up for the ground lost during the pandemic and experts are warning that the US is still struggling to recover.
“We’re still millions shy of where just normal improvement in employment would take us,” said Lindsey Piegza, chief economist at Stifel Financial.
“I hesitate to use the word ‘robust’ because we’re simply patting ourselves on the back in terms of getting back to where we were before the pandemic.”
Will the Federal Reserve increase interest rates again?
While the jobs market was certainly a concern, the biggest economic struggle of 2022 has been the high rate of inflation recorded for much of the year. The Federal Reserve has focused its attention on bringing down the rate of price rises, predominately using interest rate hikes to cool the economy.
Raising the interest rate makes borrowing more expensive. The Fed took this action to restrict economic growth but that policy can also have a negative effect on hiring, as is evidenced in the latest jobs report.
A statement from the Federal Reserve’s December meeting made clear that interest rates would remin high for much of 2023: “In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy.”
With both hiring and inflation now seeming to slow it may encourage the Fed to reassess interest rate hikes in 2023. However all indications from the central bank suggest that inflation remains a top priority and any decisions to lower interest rates will only be taken once price rises are under control.