The U.S. job market held up well in 2023, despite rising interest rates. Employers added 2.7 million jobs last year and unemployment remained under 4% throughout the year.
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The U.S. job market capped off a strong year in December, as employers continued hiring at a solid pace.
Employers added 216,000 jobs last month, according to the Labor Department. The unemployment rate held steady at 3.7%.
Unemployment has now been under 4% for almost two years — the longest streak of rock-bottom jobless rates since the Vietnam War.
“The labor market ended 2023 on a solid footing,” said Nela Richardson, chief economist for the payroll processing company ADP. “We’ll see what 2024 will bring.”
December’s job gains were concentrated in government and health care. Retailers added 17,000 jobs, suggesting a solid finish to the holiday shopping season.
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Job growth has been resilient despite Fed’s brutal interest rate increases
For all of 2023, employers added 2.7 million jobs. That’s a slowdown from the two previous years, when the economy was red-hot, rapidly rebounding from pandemic layoffs. But last year’s job growth was still stronger than every other year since 2015.
The job market has proven to be resilient despite the Federal Reserve’s aggressive push to combat inflation with higher interest rates. Even sensitive industries where the cost of borrowing is elevated continued to add jobs last year. Construction companies added 17,000 jobs in December.
Nancy McNamara completed a building trades internship in October and quickly secured a job with a busy weatherization contractor in Rutland, Vt.
“I feel like every time we’re at a job site, he’s getting a call from someone else,” McNamara said. “He’s booked right up through — I don’t even know when.”
McNamara is eager to learn new construction skills and has gotten training offers from a carpenter and a drywall contractor.
“I like being tired at the end of the day and feeling like I accomplished something,” she said. “With work like this, that’s exactly how I feel.”
Hotels, restaurants still hasn’t recovered to pre-pandemic levels
The leisure and hospitality sector — which includes restaurants and hotels — added 40,000 jobs last month but overall employment in the sector still hasn’t quite recovered to pre-pandemic levels.
Government employment was also slow to bounce back from the pandemic, but strong government hiring in 2023 finally closed that gap.
Wages are rising, but not as fast as they were earlier in the year. Average wages in December were up 4.1% from a year ago. Slower wage growth puts less upward pressure on prices, which should be reassuring to inflation watchdogs at the Fed.
“There’s very little risk of a wage-price spiral that will push up inflation in 2024,” Richardson said.
The good news for workers is that wages have been climbing faster than prices in recent months, so the average paycheck stretches further.
