Editor's Note: This report is based on survey data from December 2022 that was published in January 2023. This is the most recent data available. (Source: Bureau of Labor Statistics)

U.S. employers added more than 230k jobs last month as the unemployment rate once again dropped to 3.5%, marking the lowest rate on record in the past 50 years.  

The latest report from the Bureau of Labor Statistics marks the 10th straight month with a national unemployment rate below 3.8%—a feat more remarkable considering how relatively small the unemployment rate has been while maintaining this level of consistency.

In line with the falling unemployment rate and new job creation, there were significant reductions in several subsets of job seekers who had been unattached or marginally attached to the workforce prior to last month.

For example, the number of people experiencing long-term unemployment (27 weeks or more of consecutive unemployment) fell by nearly 150k. Throughout 2022, the number of people in the “long-term unemployed” category dropped about 45%, down from 2 million to 1.1 million would-be workers over the year.  

Similarly, the number of people who are outside the workforce but who still want a job fell by just over 350k down to 5.2 million, which brings this group on par with pre-pandemic numbers.

The leisure and hospitality industry saw the largest number of new jobs added with just under 70k new payroll entries last month; a little less than 40% were new hires in restaurants, bars, and food service. Still, despite averaging almost 80k new jobs per month throughout 2022, the leisure and hospitality industry remains about 5.5 million jobs short of pre-pandemic levels.

The healthcare industry also saw significant gains last month, netting a gain of 55k employees–30k of which were hires in the ambulatory care field and 15k in hospital staffing.  

Other industries that saw an increase in their payroll numbers last month include construction (+28k), social assistance (+20k), other services (+14k), and mining (+4k). The only industry that saw a reduction in jobs was professional and business services, which experienced a net loss of 6k jobs.

Further, as is expected with a strong labor market, the average hourly pay rose by nine cents to $32.82, while the average hourly work week dropped to 33.8 hours.

Mployer Advisor’s Take

For three of the months that make up the back half of 2022, the unemployment rate was at 3.5%—a rate that’s only been achieved two other months in the past 50 years.  

Although there are many benefits to this sustained labor market performance, the positive effects of which cannot be overstated, the most relevant downside in the eyes of the Federal Reserve is the resulting upward inflationary pressure.

Still, many experts would argue that several other factors, including supply chain issues and record corporate profit shares, are playing a part in the hot jobs market, while upward pressure on wages have certainly played a role in the inflation saga.

With annualized wage growth now below 3% and month-to-month inflation increases dropping quickly to nearly reach Federal Reserve analyst targets already, the case for the hot labor market as the primary cause of inflation appears increasingly flimsy.

Regardless, interest rate increases are likely to continue for the foreseeable future, with the Fed now signaling another hike of a percentage point on the short-term rate over the next year.

Eventually, the market will cool, and the rates will come down. How soon and how quickly is yet to be determined.  

Eager for more exclusive content? Check out the Mployer Advisor blog, or review last month’s employment numbers here.

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