The latest monthly jobs report, set to be released at 8:30 a.m. ET, is expected to show that the US economy added 200,000 jobs in December, with the unemployment rate holding steady for the third-straight month at 3.7%.
The Labor Department’s final monthly employment tally for 2022 likely brings with it some familiar story lines.
— Job growth is expected to remain robust, although slower than the breakneck pace of historically high job gains during the early stages of economic recovery from the pandemic.
— Workers are still not returning to hard-hit sectors such as leisure and hospitality, public service and child care.
— The strong labor market, while it keeps the economy churning, is a little too consistently vigorous for the Federal Reserve’s needs to reduce inflation by tempering demand.
— The tight labor market needs more workers, and wage growth still hasn’t returned to pre-pandemic levels, which would help quell fears of a wage-price spiral, when higher wages cause price increases that in turn cause higher wages.
Lather, rinse and repeat.
“The preponderance of evidence suggests that the labor market is still nowhere near back to normal,” said Julia Pollak, senior economist with ZipRecruiter online employment marketplace.
The US labor market remains atypically tight — something that was reinforced Wednesday when the Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) report for November. It showed there were still north of 10.5 million job openings, or about 1.7 available positions for every unemployed person looking for work.
The survey also showed that what has been deemed the “Great Resignation” is still chugging along, Pollak said. During the Covid-19 pandemic, a record number of workers voluntarily quit their jobs in search of greener pastures — be it better working conditions, higher pay, or increased flexibility.
The number of people per month quitting their jobs has now landed above 4 million for 18 months straight. In the two decades leading up to the pandemic, the monthly average was 2.6 million.
“Companies are still battling huge retention difficulties,” Pollak said.
The latest JOLTS didn’t show that the market was loosening up as maybe some had hoped or expected. But it did provide a window into some of the divergence that’s occurring at a time when some businesses are hiring more to meet consumer demand while others scale down their operations because of bloat, the rippling effects of high interest rates, or preparation for less fruitful economic times ahead.
Industries such as accommodation and food services reported about 50% fewer layoffs in November than what was seen on average between 2000 and February 2020, Pollak said.
“I think it’s mostly just pre-pandemic recovery,” she said. “Leisure and hospitality is still short hundreds of thousands of workers and just still ramping up, because spending recovered more quickly than staffing.”
As of October 2022, the leisure and hospitality sector was still below pre-pandemic employment levels by more than 1 million jobs, or 6.3%, according to a CNN Business analysis of BLS employment data.
Technology companies have accounted for the lion’s share of job cuts announced in recent months. During the pandemic, when people were relegated to working and spending their money from home, tech and e-commerce firms bulked up to meet the demand.
During 2022, technology was the leading job-cutting industry, with 97,171 reductions announced, according to Challenger, Gray & Christmas’ latest job cut announcement report released Thursday.
Overall, job cuts trended upward in 2022 at 363,824 as compared to 321,970 the year before. There were 43,651 job cuts announced in December, a 129% jump from December 2021, according to the report.
But the job cuts announced in 2022 were the second-lowest on record, going back to 1993, Challenger, Gray & Christmas data showed. In 2019, there were 592,556 job cuts announced.
“The overall economy is still creating jobs, though employers appear to be actively planning for a downturn,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in the report.
If the monthly job gains come in as expected on Friday, that would mean the economy added more than 4.5 million jobs in 2022.
That would be the second-highest annual total on record, behind the massive 6.7 million gains in 2021, which of itself was a pendulum swing from a record 9.2 million job losses in 2020, BLS data shows.
“The Federal Reserve would like to see a [monthly job growth] number closer to 100,000 or below that,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “That’s more in line with a clearly cooling labor market.”
Economists are also expecting average hourly earnings growth to slow on a monthly and year-over-year basis, to 0.4% and 5%, respectively, according to Refinitiv.
Wage gains, although outpaced by inflation, remain well above pre-pandemic averages and beyond what the Fed wants to see in its price-busting campaign. Chair Jerome Powell, while acknowledging that the wage increases did not cause inflation to spike to the highest levels in 40 years, has repeatedly noted that persistent wage growth in such a tight labor market could keep inflation levels elevated.
“This is a set of labor market data that for workers and job seekers, [continued, strong nominal wage growth] it’s very much positive news,” Bunker said. “But for central bankers, they see this as a problem.”
Inflation has started to come down in recent months, with key gauges showing declines. But for the Fed to reach its desired target of 2% inflation, the labor market will have to take a hit, with unemployment rising to about 4.6% this year, according to the central bank’s projections released in December.
“The fact that inflation appears to be cooling down without the labor market taking a significant hit is a sign that a lot of this very high inflation was not driven by the labor market and that it is possible for inflation to be coming down from these levels without the labor market taking a hit,” Bunker said.
“But it’s unclear how far inflation can fall without the labor market deteriorating, or rather, it’s not clear what the underlying pace of inflation is with the labor market this tight.”
—CNN’s Matt Egan contributed to this report.