Employment: Solid Job Gains, Wage Gains Ease

Bottom Line: Nonfarm payroll gains in December were slightly stronger than expected, mostly offset by modest downward revisions to the prior two months. The unemployment rate fell two-tenths following annual revisions by the BLS and jobs gains in the household survey of over 700k in December. Moreover, the labor force participation rate rose after stagnating much of the year. Average hourly earnings growth cooled modestly, up just 0.3% in December, annualizing at 4.1% in the final three months of 2022 versus 4.6% over the course of the year, suggesting a modest, slow deceleration in wage gains (a major focus for the Fed). At the sector level, the well-paying education and health services segment saw the strongest job gains in December and remained on a strong trend. Construction jobs surprised to the upside, as nonresidential construction remained robust in the face of weak residential activity. Overall, this was another solid labor report that showed only a modest slowdown in the trend rate of job creation and wage gains.

Payroll Employment rose by 223k in December, compared with market expectations for an increase of 203k. The prior 2 months were revised, lower in November by 7k and lower in October by 21k. Government jobs ROSE by 3k. Consequently, private sector jobs ROSE by 220k. Private education jobs rose by 5k. State and Local education jobs fell by -11k. Overall employment is now 3.0% ABOVE its year-ago level,  Over the past 12 months, 4,503k jobs have been created.In December, the job gains were in:

Jobs were shed in Information (-5k).The Unemployment Rate FELL by 0.1 percentage points in December to 3.5%, compared with market expectations for a small increase to 3.7%.

Household employment rose by 717k while the labor force increased by 439k, resulting in a decrease in the number of unemployed of 278k.

The Labor Force Participation Rate ROSE by 0.1 percentage points to 62.3%.

The Employment-Population Ratio ROSE by  0.2 percentage points to 60.1%.The number of people Working Part-Time for Economic Reasons ROSE by 187k to 3,810k. while Long-Term Unemployment FELL by 146k to 1,069k (accounting for 18.7% of the unemployed),  while the Mean Duration of Unemployment FELL by 1.9 weeks to 19.5 weeks.There are now 5.7 million people officially unemployed. In addition, there are another 5,176k people who say they want a job but are not currently looking for one.  Finally, another 3,810k people are working part-time because of slack economic conditions.The Index of Aggregate Hours FELL by 0.1%, combining the moderate gain in private payroll employment and the shorter workweek.Hourly Earnings ROSE by 0.3% in December, below market expectations of 0.4%. Hourly earnings are now 4.6% ABOVE their year-ago level. Weekly Earnings were steady and were 3.1% ABOVE their year-ago level. The Average Workweek FELL by 0.1 to 34.3 hours, BELOW the market consensus at 34.4 hours.