The U.S. economy added jobs at a solid clip in December, pushing the unemployment rate back to a low of 3.5% as the labor market remains tight, but Federal Reserve officials could draw some solace from a moderation in wage gains
Still, the U.S. central bank's fight against inflation is far from being won. The Labor Department's closely watched employment report on Friday also showed household employment rebounding by a whopping 717,000 jobs last month.
"The labor market remains resilient but is losing pep and worker shortages remain intense," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "While wage growth has moderated, it's still far from consistent with price stability. Don't look for the Fed to ratchet down its hawkish talk or slow the pace of rate hikes on February 1."
The strong job gains are despite high-profile layoffs in the technology industry as well as interest rate-sensitive sectors like housing and finance. Government employment rose 3,000, though a strike by 36,000 university employees in California hurt state government education payrolls, which fell 24,000.
The unemployment rate is back at five-decade lows and there were 1.7 jobs for very unemployed worker in November. In addition, 23 states and Washington DC raised the minimum wage on Jan. 1. Most workers across the country will also get cost of living adjustments early in the year. The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007. Last month, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.
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