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The labor market has been on a warm streak for much of 2022, but cold winds are blowing: NPR

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The Labor Department reports December job gains on Friday. Despite some high-profile layoff announcements, the overall labor market remains tight.



STEVE INSKEEP, HOST:

The US labor market improved at the end of the year. We have new job numbers this morning. So let’s call on NPR business correspondent Scott Horsley. Hi Scott.

SCOTT HORSLEY, BYLINE: Hello, Steve.

INSKEEP: What do the numbers show you?

HORSLEY: It was another solid month of job gains in December. US employers added 223,000 jobs last month. This is a slight drop from the previous two months. And the unemployment rate actually fell to 3.5%, the lowest level in half a century…

INSKEEP: Wow.

HORSLEY: …Even though more than 400,000 people left the sidelines last month and started working or looking for work. Now the Federal Reserve has deliberately tried to put the brakes on by raising interest rates to curb inflation. But Dave Gilbertson, who works for timesheet tracking company UKG, says the task engine is still running.

DAVE GILBERTSON: For me, the headline about the 2022 job market as a whole — it’s just a remarkable calm. The labor market has been that calm eye at the center of the storm.

HORSLEY: If you count the whole of 2022, the economy added 4.5 million jobs, which is a very good performance. And that was more than enough to fill that big hole in the job market that remained when the pandemic started two years ago.

INSKEEP: Does that mean that the rise in interest rates, at least so far, has hardly affected the labor market?

HORSLEY: It has some effect, but it’s definitely muted. For example, we know there was a downturn in the housing market, but construction companies still added 28,000 jobs last month. There has been some slowdown in the financial sector, as well as in the manufacturing sector. Factories added 8,000 jobs last month, but that’s only about a quarter of what we saw on average last year. One place where we’re definitely seeing a slowdown is in temporary services, which is sometimes an indicator of what might be in store in the months ahead. Companies that supply temporary workers cut 35,000 jobs last month. Businesses are definitely on the lookout for a possible recession on the horizon. And as a result, Gilbertson says, some employers are becoming more cautious about adding workers to their payroll.

GILBERTSON: They’re kind of putting the brakes on hiring a bit, keeping the employees that they have because they don’t want to be in a bind if things actually continue. But they are starting, again, to let some air out of the tire when it comes to the number of overtime hours offered or the total number of shifts offered.

HORSLEY: The Federal Reserve would actually welcome some easing in the labor market, especially if it helps maintain a cap on wages. The central bank fears that rapidly rising wages will put upward pressure on inflation. Last month, the average hourly wage was 4.6% higher than a year ago, representing a slightly lower annual increase than the previous month.

INSKEEP: Wages continue to rise, but not as fast as inflation, let’s note. It’s also worth noting that the anecdotal evidence of employment slowdowns is there – 18,000 workers to be laid off at Amazon, 7,000 jobs to be cut at Salesforce. What do you think ?

HORSLEY: Yeah, those numbers are making headlines for sure. And for the workers concerned, it’s obviously a big disruption. But so far, when we look at the economy as a whole, we don’t see evidence of truly widespread job cuts. New jobless claims, which are somewhat of a proxy for layoffs, remain at historically low levels. Nela Richardson, who is the chief economist at payroll processing firm ADP, says companies that cut large numbers of workers, like Amazon, are usually companies that have grown very rapidly over the past two last years.

NELA RICHARDSON: These companies took advantage of a pandemic economy where people were at home. They were hungry for the internet and hungry for devices. We are now coming to a point where consumer spending has changed again. Technology reacts by withdrawing.

HORSLEY: Other employers, however, say that even if their business slows down, they will be reluctant to let people go because it has been such a challenge over the past two years to find workers.

INSKEEP: Well, it’s true. Scott, thank you very much. I really appreciate.

HORSLEY: You’re welcome.

INSKEEP: NPR’s Scott Horsley.

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