Reaction: The Job Market Slowed But Dodged a Recession in 2023
Reaction: The Job Market Slowed But Dodged a Recession in 2023
Friday’s Jobs Report was mixed, with solid job gains (+216K) and wage growth (4.1% over the year) in the establishment survey, but weak employment growth (just +72K) and participation-related figures in the household survey. Factoring in downward revisions to the prior months’ figures, the 3-month average job gain was 165K, right in line with the 2019 average, suggesting that the labor market has come back to pre-pandemic normal.
A Remarkable Year for Unemployment
The December report rounds out a year of labor force data. Overall, 2023 was a remarkable year for the job market in that the economy dodged a widely anticipated recession, despite 500 basis points of interest rate increases in 2022 and 2023. Not only that, but it tied with 1968 as the 5th-best year on record in terms of the average unemployment rate—and the year black unemployment hit a record low, and youth unemployment hit the lowest rate since the 1950s. It was also a solid year for labor force growth.
A Mediocre Year for Job Gains
When it comes to job gains, however, 2023 was middle-of-the-road. Employment grew only 1.7% over the year, which puts it in the bottom half of all years since 1948. And job growth narrowed sharply, becoming very concentrated in just a few sectors. By the end of the year, just three major sectors—healthcare, government, and leisure & hospitality—were driving 92% of all job growth. Outside of those sectors, labor markets were starting to look anemic.
A Solid Year for Wage Growth
Year-over-year wage growth slowed from 4.8% in December of 2022 to 4.1% in December of 2023. But inflation slowed more—from 6.4% to 3.1%—and so real wage growth flipped positive, sustaining expectation-beating consumer spending, and setting the economy up for continued resilience in 2024.
Take a tour of the report through ZipRecruiter visualizations HERE.
