Unemployment falls in the United States to 3.5% in December due to the strength of job creation

America's buoyant job market is only cooling very slowly.

Billboards with job offers abound in the street and the number of vacancies continues to be double that of the unemployed, although the economy is feeling the effects of inflation and the rise in interest rates and job creation has slowed.

Last December, 223,000 non-agricultural jobs were created, according to data released this Friday by the Bureau of Labor Statistics.

The unemployment rate has fallen to 3.5%, equaling the minimum of the last half century.

After the December data, the United States chains 24 consecutive months of job creation, which coincides with the time that Joe Biden has been president.

In those two years, 11.2 million jobs have been created (including 4.5 million in 2022) in the heat of the recovery from the pandemic and a favorable inertia that has been sustained.

These are the two highest annual job creation figures ever recorded.

Unemployment has dropped from 6.7% to 3.5% in those two years and the economy has exceeded employment levels prior to the coronavirus crisis.

The forecasts pointed to the creation of 200,000 jobs in December and an unemployment rate of 3.7%, with which the figures exceed expectations, although the data for the previous two months have been slightly revised downwards.

Despite the fact that the economic slowdown has caused job creation to slow down somewhat (the data for the last month is the lowest in the last two years), there are some factors that feed back the strength of the labor market.

The labor shortage is being influenced by factors such as early retirement, the higher cost of child care, the increase in transport costs and the reduction in immigration, which reduce the active population.

And faced with this shortage and the difficulties to hire, companies are thinking twice before laying off their employees,

There have been some announcements of mass layoffs (at the beginning of the year Salesforce has announced that it will lay off 10% of its workforce, some 8,000 employees, and Amazon has raised its own job cut to 18,000 positions), but the number of requests for subsidies Unemployment remains very low, according to data also published this week.

For the Federal Reserve, the strength of the labor market is cause for concern to the extent that it could push wages up and fuel an inflationary spiral.

In the minutes of its last meeting, published this week, the central bank indicated, in reference to the November data, that "the growth of nominal wages continued to be high and remained above the rate considered compatible with the inflation objective of the 2%".

In that month, average hourly wages increased by 5.1% year-on-year, but in November the growth rate has slowed to 4.6%, which is good news for the Federal Reserve at a time when it has slowed down in the pace of interest rate rises.

But the members of the Federal Reserve's monetary policy committee also believe that with an appropriately restrictive monetary policy path, supply and demand in the labor market will balance out, relieving upward pressures on nominal wages and prices.

The members calculate that the unemployment rate will rise by close to one point in 2023, until closing the year at around 4.6%.