Even though payroll growth slowed in December, it was still better than expected, a sign that the labor market is still strong even as the Fed tries to slow economic growth.
The unemployment rate fell to 3.5%, below the expectation, as nonfarm payrolls increased by 223,000 for the month. The 256,000 gain in November was revised down 7,000 from the original estimate.
Wage growth was less than anticipated. The average hourly earnings went up for the month and the year. There were two estimates for growth.
Health care and construction added the most jobs, followed by construction and social assistance.
The stock market futures went up after the release as investors looked for signs that the jobs picture is cooling.
The market is responding to the softer average hourly earnings number. The trick is whether or not this is inflationary or not. If average hourly earnings don't change, the unemployment rate won't matter.
Despite the Fed's attempts to slow the economy, the labor market is still strong. The central bank has raised its benchmark interest rate seven times in the last four years.
There is a gap between demand and supply. Despite the Feds rate hikes, there were 1.7 job openings for every available worker as of November. Wages haven't kept up with inflation despite the strong demand.
The unemployment rate dropped as the labor force participation rate increased to 62.3%, still a full percentage point below where it was in February 2020.
The measure of unemployment that takes into account discouraged workers and those holding part-time jobs for economic reasons fell to 6.5%, the lowest reading in a data set that dates back to 1994. The headline unemployment rate has not been this low in over forty years.
The household count of employment increased by 717,000 in the month of February. The household survey has been lagging behind the establishment count.
Most economists think that the U.S. will be in a shallow recession by the end of the decade because of the Fed's policy tightening. According to the Atlanta Fed, GDP grew at a 3.8% rate in the last year of the decade.
At their last meeting, Fed officials said that they are encouraged by the latest inflation readings but will need to see more progress before they can ease up on rate hikes.
Markets are expecting the Fed to raise rates by a quarter-percentage point at its next meeting.
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