US job growth slowed for the fifth consecutive month in December after sharp interest rate increases from the Federal Reserve curtailed economic activity even as the US labor market remained historically tense.

The largest in the world Economie It added 223,000 jobs in the final month of 2022, less than the downward-adjusted increase of 256,000 recorded in November and well below last year’s peak of 714,000 in February. Most economists expected an increase of 200,000.

After the December increase, monthly job growth averaged 375,000 in 2022. The number of jobs added has decreased each month since August.

Although the pace of job growth has slowed, the labor market is still showing resilience that should force the Federal Reserve to continue raising interest rates this year.

Data released by the Bureau of Labor Statistics showed that the unemployment rate unexpectedly fell to 3.5 percent, back to an all-time low.

“This is still a very tight job market,” said Veronica Clark, an economist at Citigroup. For an economist, the unemployment rate is low [is] Risks of rising future wages.

Still, slowing wage growth in December helped ignite a stock market rally as investors bet the Fed wouldn’t need to be as aggressive as it finally tightens policy. Stocks were further boosted by a sharp decline in services activity, according to ISM data released on Friday. The S&P 500 rose 1.6 percent in late morning trading in New York, while the Nasdaq Composite rose 1.4 percent.

The two-year Treasury yield, which is affected by changes in interest rate expectations, fell 0.19 percentage point to 4.26 percent, marking a sharp rise in the price of the debt instrument. The yield on the benchmark 10-year Treasury note, seen as a proxy for borrowing costs around the world, fell 0.14 percentage point to 3.58 percent.

The US central bank is actively trying to calm down the work market and curb demand for new hires as it seeks to ease price pressures that have pushed inflation to multi-decade highs. Since March, the Fed has raised its benchmark policy rate from near zero to just under 4.5 percent in one of the most aggressive campaigns in its history.

While the worst of the inflation shock appears to be over, price pressures are I hold on in the service sector of the economy. In an interview with the Financial Times this week, Gita Gopinath, Senior Deputy Managing Director at the International Monetary Fund, urge The Fed should “stay the course” in terms of tightening, arguing that US inflation “hasn’t turned the corner yet.”

In remarks delivered on Friday, Fed Governor Lisa Cook cautioned against “putting too much weight” on recent inflation data that she said looked “favorable.” It said it was “keeping a close eye” on labor costs, which it said were crucial to the future trajectory of inflation.

Amid a labor shortage that Fed officials warn will not be easily reversed, wage growth remains at a pace far from the Fed’s 2 percent stride. inflation targeting.

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In December, average hourly earnings rose another 0.3 percent, less than expected and slower than the previous period, which was revised downward. On an annual basis, it increased by 4.6 percent. The labor force participation rate, which measures the share of Americans who are either employed or looking for a job, was unchanged at 62.3 percent.

Evercore’s Peter Williams said the payroll data should give the Fed “comfort that inflationary pressures have peaked.”

The biggest job gains were in the leisure and hospitality sector, with 67,000 jobs added in December. Employment in healthcare rose by 55,000, while the construction industry gained 28,000 jobs.

Among the sectors with limited employment gains were retail, manufacturing, transportation and warehousing.

In a statement released after the report, President Joe Biden said the recent job gains reflect “the transition to steady and stable growth.”

“These historic jobs and unemployment gains give workers more strength and American families more breathing space,” said the US president, amid “cost-of-living pressures.”

Federal Reserve policymakers acknowledged that eliminating inflation would require job losses and thus higher unemployment. According to the latest individual projections published by the Fed, most officials see the unemployment rate rising to 4.6 percent this year and next year as the benchmark policy rate exceeds 5 percent and stays there for a long time.

“hold [above 5 per cent] “Until we get evidence that inflation is actually coming down, that’s the message we’re trying to get across,” said Esther George, outgoing chair of the Kansas City Federal Reserve Thursday.

In a similar tone this week, Neel Kashkari of the Federal Reserve Bank of Minneapolis said he expects the central bank to raise the federal funds rate by another percentage point over the coming months. He will be a voting member of the Federal Open Market Policy Committee this year.

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Fed funds futures traders widely expect the Fed to advance towards the so-called “terminal” level in increments less than half a point and the 0.75 percentage point highs it has used during this tightening campaign. According to CME Group, the odds of a quarter-point rate hike at the February meeting are currently 65 percent.

Should the Fed follow through on its plans, economists warn that more material job losses could be on the horizon. Those consulted Last month in a joint poll by the Financial Times and the Global Markets Initiative at the University of Chicago Booth School of Business, it predicted the unemployment rate would reach at least 5.5 percent next year as the economy enters a recession.

Additional reporting by Harriet Clarevelt in New York