A “Now Hiring” signal is displayed on a storefront within the Adams Morgan heighborhood in Washington, D.C., on Oct. 07, 2022 .

Anna Moneymaker/Getty Images

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Anna Moneymaker/Getty Images

A “Now Hiring” signal is displayed on a storefront within the Adams Morgan heighborhood in Washington, D.C., on Oct. 07, 2022 .

Anna Moneymaker/Getty Images

The U.S. job market closed out 2022 on a excessive word.

Employers added 223,000 jobs in December, capping a yr by which the financial system added 4.5 million jobs, greater than refilling the deep gap left by the coronavirus pandemic two years earlier.

While some massive corporations have introduced job cuts in latest weeks, the general labor market stays tight. The unemployment fee in December inched down to three.5%, matching a half-century low.

Demand for employees remained remarkably sturdy all through the final yr, even because the Federal Reserve was aggressively making an attempt to gradual the financial system by raising interest rates, in an effort to struggle inflation.

“The labor market’s been this calm eye in the center of the storm,” says Dave Gilbertson, vice chairman of UKG, which makes shift-scheduling software program.

Hiring has slowed because the first half of final yr, when employers have been including greater than 400,000 jobs a month, on common. And an extra slowdown is anticipated, as companies brace for a possible recession.

“They’re kind of pumping the brakes a little bit on hiring,” Gilbertson says.

Businesses are holding onto their employees

So far, there’s little proof of widespread job cuts, regardless of high-profile layoff announcements this week from corporations like Amazon and Salesforce. New claims for unemployment advantages stay at traditionally low ranges.

More than 400,000 employees entered or re-entered the workforce final month, and the share of adults working or in search of work inched up by a tenth of a %.

Some companies say they’re reluctant to let workers go, even when demand drops, after struggling for much of the last two years to find enough workers.

Many of the high-tech companies which are reducing jobs had expanded quickly lately.

“These firms benefited from a pandemic economy where people were at home, they were hungry for the Internet and hungry for devices, and spending was directed towards the services and the goods that tech was providing,” says Nela Richardson, chief economist on the payroll processing firm ADP.

“Now we’re coming to a point where consumer spending has shifted again,” she says. “Tech is responding by pulling back.”

The Fed would welcome a cooler labor market

Financial companies are additionally reducing again on hiring, within the face of rising rates of interest. And factories have scaled again hiring as properly. Manufacturers added simply 8,000 jobs in December, 1 / 4 of the month-to-month common final yr.

“We’re waiting for demand to come back,” says Tim Fiore, who conducts a monthly survey of factory managers for the Institute for Supply Management.

“The first half of 2023 is going to be sluggish,” Fiore says. “But the second half of 2023 is going to be pretty strong.”

The Federal Reserve would welcome some slowdown in hiring, particularly if it helps to maintain a lid on wage beneficial properties. The central financial institution is nervous that fast pay will increase might add to inflation, particularly in labor-intensive service companies.

Average hourly wages in December have been 4.6% greater than a yr in the past. The annual enhance in November was 5.1%.