Status: 06.01.2023 4:35 p.m
Despite the series of rate hikes, the US labor market is still in good shape. Unemployment fell to its lowest level since February 2020 and more jobs were added than expected.
The labor market in the USA remains robust: more jobs were created in December than expected. 223,000 new jobs were added outside of agriculture, after 256,000 in November, as the government in Washington announced. Economists surveyed by Reuters had only expected 200,000 new jobs in December.
In addition, the separate unemployment rate fell to 3.5 percent from 3.6 percent in November. It has thus reached its lowest level in almost three years. Here, too, the economists were surprised. They had assumed an average unemployment rate of 3.7 percent. According to the department, 5.722 million Americans were unemployed in December, up from 6.0 million a month earlier.
Demand for labor remains greater than supply
Wages in December, on the other hand, rose less significantly than forecast. According to the department, average hourly wages in the US increased by 0.3 percent month-on-month. Economists had expected an average increase of 0.4 percent. Compared to the same month last year, hourly wages in December increased by 4.6 percent. Many companies in the United States have been complaining about a shortage of workers for a long time, which is why wages are rising noticeably.
This is driving inflation from the last 7.1 percent, which the US Federal Reserve wants to curb. Higher interest rates should not only dampen demand, but also cool down the overheated labor market. The currency watchdogs last raised the key interest rate by half a percentage point in December – to the new range of 4.25 to 4.50 percent. Previously, she had made four major rate hikes in a row – by 0.75 percentage points each time.
Nevertheless, the increase in employment remains “crisp”, commented Bastian Hepperle from Bankhaus Hauck Aufhäuser Lampe. “The demand for labor is still far greater than the supply.” The Fed’s key interest rate will rise again by 50 basis points in February due to persistently high wage pressure. According to Thomas Gitzel, chief economist at VP Bank, the US labor market is doing well: “The Fed will therefore continue to raise interest rates.”
Slower pace of interest rates thanks to easing wage pressure?
According to US currency watchdog James Bullard, a persistently robust labor market increases the chances of a “soft landing” in the US economy despite the rise in interest rates – i.e. an economic slump can be avoided. In view of the rosy prospects on the job market in 2023, the central bank can concentrate on fighting inflation.
But she also looks at the development of hourly wages. “Since wage pressure seems to be easing, interest rate expectations are unlikely to be pushed,” said Helaba economist Ulrich Wortberg. In the opinion of most US monetary authorities, “flexibility and optionality” is required for further monetary policy – probably a sign that the central bank will continue to take its foot off the gas.
Therefore, speculation increased on the futures markets that interest rates could only be raised by a quarter of a percentage point in February. This also allowed investors to take a deep breath on the stock markets. The DAX climbed 0.2 percent to 14,471 points in the afternoon. Wall Street was also up at the start of trading.