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Employers slowed their rate of hiring in December, easing the Fed's inflation fears

SCOTT SIMON, HOST:

There have been some serious layoffs in the high tech industry lately - Amazon cutting 18,000 jobs. Salesforce is laying off more than 7,000 people. But the broader job market is still humming and the unemployment rate last month was just 3.5%. That matches its lowest level since 1969. NPR's Scott Horsley joins us. Scott, thanks so much for being with us.

SCOTT HORSLEY, BYLINE: Good morning, Scott.

SIMON: Employers have been adding hundreds of thousands of jobs month after month. What's been going on?

HORSLEY: Yeah, December was another solid month of job growth, with 223,000 jobs added last month. The pace of hiring has slowed since the beginning of last year, but there are still lots of jobs available. What's also encouraging is that more than 400,000 people joined or rejoined the workforce last month. And economist Michael Pugliese of Wells Fargo says that's helping to close what had been a big gap between employers' demand for workers and the number of people available to fill those jobs.

MICHAEL PUGLIESE: It's just one report, right? You know, you don't want to put too much weight on a single reading, but it has the right mix of ingredients for, you know, evidence that labor supply and demand are coming back into balance.

HORSLEY: And that may spell some relief for the Federal Reserve, which has been worried that an overheating job market could fuel inflation. Yesterday's report doesn't erase those concerns, but it does suggest things are moving in the right direction.

SIMON: And Wall Street's excited.

HORSLEY: Yeah. The Dow Jones Industrial Average soared 700 points yesterday, or more than 2%. The other major stock indexes rose by a similar amount. Investors are hoping that as the job market gradually cools, it will take some pressure off inflation and allow the Fed to slow or even stop raising interest rates. Average wages in December were up 4.6% from a year ago, which is still probably faster than the Fed would like. But it's a smaller annual increase than the month before. We are going to get some more comprehensive wage data later this month. And that's just before the central bank is set to make its next decision on interest rates.

SIMON: At the same time, Scott, are there weak spots in this week's report?

HORSLEY: You certainly see a slowdown in manufacturing jobs. That's a sector that's particularly sensitive to rising interest rates. Factories are still hiring, but not as fast as they had been. Of course, you talked about the job cuts we've seen in high tech. Another thing to keep an eye on is temporary help firms. They cut 35,000 jobs last month. Temps are often the first people hired when businesses are growing and the first to be let go when demand tapers off. Jim McCoy is senior vice president at ManpowerGroup, a big temp help company.

JIM MCCOY: In general, there's been a slight softening in demand for temporary workers that's been happening since the summer. Recently, hiring was a little bit down, particularly in support of retail sector, which you would normally see more of a pickup of temp hiring around the holidays. That was down a little bit.

HORSLEY: At the same time, McCoy says he's still seeing robust demand for temp workers in fields like health care. And health care also added a lot of permanent workers in December with 55,000 new jobs.

SIMON: Scott, what do you think we can look forward to for the job market in the new year?

HORSLEY: We're probably going to see slower job growth. Employers added 4 1/2 million jobs last year, and we're not likely to repeat that, especially because all the jobs that were lost in the early months of the pandemic have now been replaced. So far, though, there has been no sign of widespread job cuts, despite some of those ominous headlines you mentioned and concerns about a possible recession. It seems like after struggling for much of the last two years to find enough workers, employers are going to be slow to hand out pink slips if they can avoid it.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.