Jobs report preview: Strong close to year as wages remain elevated
REAL ECONOMY BLOG | January 03, 2023
Authored by RSM US LLP
We expect the December U.S. jobs report on Friday to show an increase in total employment of 220,000 positions, which would bring the total number of jobs created last year to roughly 4.53 million.
While such a gain would fall below the three-month moving average of 263,000 through the end of November, it would still be well above the 65,000 per month that we think the economy needs to meet labor demand.
With such a resilient labor market, one should expect wage gains to exceed a 5% annualized pace as employers pay a premium to attract and retain workers.
These two trends—rising employment and surging wages— highlight the challenge at the Federal Reserve: It needs to tame inflation, but to get there it needs more slack in the labor market, which will lead to softer demand and a softer pace of wage gains.
For that reason, the focus of policymakers on Friday will not be on annual job gains—our forecast implies no change in the unemployment rate of 3.7%—but instead on what we expect will be a 0.6% increase in monthly average hourly earnings and a 5.2% increase on a year-ago basis.
There is little sign that these gains will ease anytime soon. We anticipate that wages will move higher over the next three months as workers demand higher pay to offset inflation. Through the end of November, the three-month annualized increase in average hourly earnings reached 5.1%, up from 4.8% in October.
We expect the primary drivers of employment to continue where they have been, in service-sector jobs led by education and health, along with leisure and hospitality.
We anticipate another strong month in goods-producing jobs, construction and manufacturing. The rebuilding that has followed the hurricane season in the southeast and a warmer-than-expected winter will bolster overall demand for construction workers.
Finally, the recent hiring in state and local government, which bolstered the overall employment gains in November by 43,000 positions, will abate, and that provides some downside risk to our forecast of a net gain of 220,000 jobs.
Call us at (325) 677-6251 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Joseph Brusuelas and originally appeared on 2023-01-03.
2022 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Condley and Company, LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Condley and Company can assist you, please call (325) 677-6251.