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Labor Market Boom Cooled Some in 2022 -- WSJ

The Wall Street Journal · 01/06/2023 12:09

By Bryan Mena

Employers added 4.5 million jobs in 2022 -- the second best year for job creation in records back to 1940 -- showing that the labor market remained a source of U.S. economic strength at a time of high inflation, climbing interest rates and uneven growth.

The number of jobs gained in 2022 was second only to the 6.7 million added in 2021 when the economy was rebounding from the pandemic, according to the Labor Department. Job growth over the last two years was robust historically, even when accounting for a current U.S. population that is much bigger than in the World War II era.

Total nonfarm payrolls grew 3% in December from a year earlier, the second-largest percentage gain in the past two decades. Average annual job growth during that period was about 0.8%.

Average hourly wages for private-sector workers rose 4.6% in December 2022 from a year earlier, down from a 4.8% increase in November. The unemployment rate was 3.5% last month, compared with 3.9% in December 2021, the Labor Department said Friday.

Here is how the labor market fared in 2022, according to the Labor Department's figures.

JOBS

Employers in the leisure and hospitality sector -- which includes restaurants, hotels and tourist attractions -- added 946,000 jobs in 2022, accounting for about 1 in five of total net jobs gained last year. Payrolls for other service providers, such as in education and healthcare, grew robustly during the year. Employment in the services sector overall grew by 3.8 million jobs in December from a year earlier, a 3% increase. Meanwhile, the goods-producing sector of the economy added 664,000 jobs during the same period, equaling a 3.2% increase.

Hiring slowed from the first part of last year and could ease further in 2023 as the Federal Reserve keeps raising interest rates to reduce inflation by slowing the economy.

In the final months of 2022, several large companies said they planned to lay off tens of thousands of workers through 2023, The announced job cuts were generally concentrated in the technology industry and industries sensitive to interest rates such as those related to housing and finance, including Goldman Sachs Group Inc., Salesforce Inc., Meta Platforms Inc. and Amazon.com Inc.

These plans, however, didn't translate into a sharp uptick in unemployment in 2022. Initial claims for jobless benefits, a proxy for layoffs, remained near prepandemic levels at year's end.

Employers' robust demand for labor meant some raced to snap up workers by offering more pay and benefits and even scrapping job interviews. Many tech workers who lost jobs quickly found others.

WAGES

American workers also raked in historically strong wage increases in 2022. Average hourly wages for private-sector workers rose 4.6% in December 2022 from a year earlier, down from a 4.8% increase in November, the Labor Department said.

But such gains didn't keep up with inflation through November, the most recent month for which the Labor Department's inflation data are available. Average hourly earnings fell 1.9% in November of 2022 from the same month of 2021, after adjusting for inflation.

Federal Reserve officials are closely monitoring wage gains as they consider future interest-rate increases to slow the economy and bring down high inflation.

"The Fed will find a little bit of comfort that the trend in average hourly earnings is moderating," said Ray Farris, chief economist at Credit Suisse Group AG ADR.

Wage gains varied by industry. Average hourly earnings for employees in leisure and hospitality rose 6.4% in the 12 months ended in December. Wages rose 4.4% in goods-producing industries during the same period, the Labor Department said.

Wage growth in lower-paying industries -- such as food preparation and retail -- has moderated, according to jobs site Indeed, which looks at advertised wages. Indeed estimated that if recent trends continue, overall wage growth will return to prepandemic rates levels by the second half of 2023.

One factor fueling wage growth in 2022 was the difficulty many employers had in finding workers. Job openings totaled 10.5 million job openings in November, the most recent month for which such figures are available, greatly exceeding the 6 million unemployed Americans seeking work that month.

DEMOGRAPHICS

Unemployment rates varied by race, ethnicity and gender in 2022. The unemployment rate for white workers was 3% in December compared with 3.3% in December 2021; it was 5.7% for Black workers in December compared with 7% in the same month a year earlier; and it was 4.1% for Hispanic workers in December, compared with 4.8% in the same month a year earlier.

The unemployment rate for adult men was 3.1% in December, compared with 3.6% in the December 2021, and 3.2% for adult women in December compared with 3.6% a year earlier. Many Americans left the labor force entirely because of retirement, health issues or other reasons. The labor-force participation rate -- or share of adults who hold or are seeking a job -- was 62.3% in December 2022, compared with 62% in December 2021.

Write to Bryan Mena at bryan.mena@wsj.com

(END) Dow Jones Newswires

January 06, 2023 12:09 ET (17:09 GMT)

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