The US labor market is advancing, but wage growth is losing momentum
The US economy added jobs at a strong rate in Decemberpushing the unemployment rate back to a pre-pandemic low of 3.5% as the labor market remains tight, but Fed officials may draw some solace from moderation in wage gains.
However, the US central bank’s fight against inflation is still a long way off. The closely watched Employment Report released by the Labor Department on Friday also showed that domestic workers rebounded with 717,000 jobs last month.
Recent declines in household workers have fueled speculation that the non-farm payroll, the main measure of employment gains, was overstating job growth.
The resilience of the labor market, despite last March the Fed embarking on its fastest rate hike cycle since the 1980s, is supporting the economy by sustaining consumer spending. However, it increases the risk The Fed could raise its target interest rate above the peak of 5.1% it projected last month and keep it there for a while.
“The labor market remains resilient but losing dynamism and the shortage of workers remains severe“While wage growth has moderated, it is still far from aligned with price stability,” said Sal Guattieri, chief economist at BMO Capital Markets in Toronto. “Don’t look for the Fed to scale back its hawkish rhetoric or slow the pace of rate hikes.” interest on the first of February.”
