Was it a strong finish to the 2023 job market? The Labor Department has an answer

LEILA FADEL, HOST:

The U.S. job market held up remarkably well last year, despite the Federal Reserve's push to fight inflation with higher interest rates. And this morning, we learned that employers added 216,000 jobs in December. The unemployment rate held steady at 3.7%. NPR's Scott Horsley joins us now with the details of the jobs report. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good morning.

FADEL: Good morning. So this sounds like a strong finish for the job market in 2023.

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HORSLEY: It really was. December's job gains were actually a little bit stronger than the previous months. And you remember November's number was puffed up a little bit when tens of thousands of autoworkers and screen actors went back to work after being on strike in October. In general, the pace of hiring has slowed since the beginning of last year, but not that much, given how hard the Federal Reserve has been pumping the brakes. Usually when the fed raises interest rates like this, the job market really suffers. But even industries that typically suffer when borrowing costs go up, like construction, have continued to add jobs. Nancy McNamara, who lives in Vermont, went through a construction internship during the fall, and she quickly got a job with a weatherization company. McNamara says there is no shortage of work out there.

NANCY MCNAMARA: I feel like every time that we're at a job site, he's getting a call from someone else and he's booked right up through I don't even know when.

HORSLEY: Of course, mortgage rates did soar this past year, which put a damper on the housing market, but those rates have started to come down a little bit after topping out close to 8% in October. The average 30-year home loan now costs just over 6.5%.

FADEL: So what does this tell us about the overall health of the job market?

HORSLEY: It is remarkably good. I mean, just look at the unemployment rate. It's been under 4% now for almost two full years. That's the longest streak of rock-bottom jobless levels we've seen since the Vietnam War. The unemployment rate has bounced up and down a little bit in recent months, as more people came off the sidelines and started looking for work. Sometimes it takes them a little while to find jobs, so that can push the unemployment rate a little bit higher, but we continue to see very few layoffs.

FADEL: So when the job market is tight like this, workers generally have more bargaining power. Are they cashing in with higher wages?

HORSLEY: Well, we certainly saw that with the unionized autoworkers. They won a record contract after their strike with pay raises of 25% or more. Of course, the vast majority of workers in the U.S. are not in a union...

FADEL: Right.

HORSLEY: ...So their best bargaining chip really is a strong job market like the one we've been enjoying. Wages are going up, not as fast as they did earlier last year, but that's not necessarily a bad thing. Economist Nela Richardson, who's with the payroll processing company ADP, says the somewhat smaller wage gains we're seeing today put less upward pressure on prices. And that's likely to be reassuring to the inflation watchdogs at the Federal Reserve.

NELA RICHARDSON: There's very little risk of a wage price spiral that will push up inflation in 2024. So that's good news.

HORSLEY: Workers are no longer quitting jobs as often as they were a year or two ago for better offers. Average wages in December were up 4.1% from a year ago. But, you know, inflation has been running just over 3%. So unlike 2022, when inflation was generally outpacing income, wages are now rising faster than prices. And the typical paycheck now buys more at the gas station or the grocery store.

FADEL: NPR's Scott Horsley. Thanks, Scott.

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