Daily Management Review

Strong Growth In December 20220 Jobs Growth In US Despite High Inflation


Strong Growth In December 20220 Jobs Growth In US Despite High Inflation
Even as the US economy grappled with the effect of rapidly rising prices due to sticky high inflation, job growth in the US was still strong through December. added 223,000 jobs in December, lowering the unemployment rate from 3.6% in November to 3.5%.
The labour market's resilience has raised hopes that the world's largest economy will avert an extreme economic recession in 2023. In efforts to attempt to calm the economy and relieve inflationary pressure, the Federal Reserve of the United States is raising borrowing costs.
As businesses grapple with the impact of higher interest rates and the possibility of lower consumer spending, recent news of large job cuts at banks and tech firms such as Amazon has piqued the public's interest.
However, the US Labour Department's monthly report showed that nearly every sector of the economy was adding jobs, with bars and restaurants, health care firms, and construction firms leading the way.
Though job losses are increasing, particularly in the technology sector, overall figures remained near historic lows last year, according to Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has been tracking such announcements since the 1990s.
"The overall economy is still creating jobs, though employers appear to be actively planning for a downturn," he said.
Since 2021, when the pandemic reopened, the US economy has slowed dramatically. Higher borrowing costs are affecting firms in sectors such as housing and banking, while rising prices are straining household budgets, raising concerns about consumer spending - the US economy's main driver.
According to the most recent report, prices in the United States rose 7.1% from a year ago, far faster than the 2% rate considered healthy. Analysts say the labor market's strength makes the path ahead uncertain, because the Federal Reserve may need to keep raising interest rates if it wants to keep inflation under control.
"As long as the labour market remains this tight, the Fed cannot rest assured that inflation will return to its 2% target," said Ronald Temple, chief market strategist at Lazard.
According to the Labor Department, average hourly earnings increased by 4.6% in December compared to the previous year. This was a slower rate than in November, which analysts interpreted as a good sign for the fight against inflation.
However, it was mixed news for workers, who have seen their pay rises fall short of inflation.
"Worker pay is failing to keep up with the rise in prices at the consumer level. This is a source of stress on household budgets. How that equation unfolds in the months ahead will be key, including whether inflation pressures relent," said Mark Hamrick, senior economic analyst for Bankrate.com.