US economy adds 223K jobs in December, unemployment rate dips

Employers added 223,000 jobs in December, the Labor Department said in its monthly payroll report released Friday, topping the 200,000 jobs forecast by Refinitiv economists. Still, it marks a slight deceleration from the downwardly revised gain of 256,000 in November and is the worst month for job creation since December 2020. The unemployment rate unexpectedly fell to 3.5%.

In a potentially welcoming sign for the Federal Reserve in its war on inflation, wage growth also cooled in December: Average hourly earnings rose just 0.3% from a month earlier and 4.6% from the previous year.

“No doubt the labor market has been able to withstand prolonged rate hikes better than many expected,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “Remember though that monetary policy acts on a lag so it’s likely an if and not a when for a slowdown in hiring. The Fed minutes made it clear that rates will remain high for all of 2023, so investors should prepare for a bumpy ride.”