US hiring slows to the lowest level in two years with 223,000 jobs added

The U.S. added 223,000 in December as hiring cooled to the lowest point in two years and wage growth slowed from November in what President Joe Biden called 'great news,' while declaring that his economic plan 'is working.'

The unemployment rate dropped to 3.5 percent from 3.6 percent, back to the low point before the pandemic in signs the labor market is resilient. 

But the slower rate of hiring showed signs high interest rates are taking a grip on employment amid fears of a recession and as historic inflation begins to show signs of dropping.

Economists had predicted the U.S would add 200,000 jobs in December. 

The U.S. added 223,000 in December as hiring cooled to the lowest point in two years and waged growth slowed from November

The unemployment rate dropped to 3.5 percent from 3.6 percent, back to the low point before the pandemic 

'Today’s report is great news for our economy and more evidence that my economic plan is working. The unemployment rate is the lowest in 50 years,' Biden said in a statement released by the White House Friday.

'We have just finished the two strongest years of job growth in history. And we are seeing a transition to steady and stable growth that I have been talking about for months. We still have work to do to bring down inflation, and help American families feeling the cost-of-living squeeze,' he said. 'But we are moving in the right direction.' 

Stocks jumped on the early news.  

Average hourly earnings rose 0.3 percent, around half of last month's 0.4 percent rise. That lowered the year-on-year increase in wages to 4.6 per cent from 4.8 percent in November. 

Government data this week showed there were 10.458 million job openings at the end of November, which translated to 1.74 jobs for every unemployed person.

The labor market has remained strong, despite the Fed embarking last March on its fastest interest rate-hiking since the 1980s.

Interest-rate sensitive industries like housing and finance, and technology companies, including Twitter, Amazon and Meta, the parent of Facebook, have slashed jobs. 

However, airlines, hotels, restaurants and bars are desperate for workers as the leisure and hospitality industry continues to recover from the COVID-19 pandemic.

Labor market resilience is underpinning the economy by sustaining consumer spending. But it raises the risk the Fed could lift its target interest rate above the 5.1% peak the U.S. central bank projected last month and keep it there for a while.

The trend in employment growth, however, could slow significantly by mid-year as expensive credit weigh on consumer spending and ultimately business investment.

The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25 percent -4.50 percent range, the highest since late 2007. 

Last month, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.

Biden crowed about the news, as he prepares to visit the southern border on Sunday to confront the immigration crisis.

'These historic jobs and unemployment gains are giving workers more power and American families more breathing room,' Biden said. 'Real wages are up in recent months, gas prices are down, and we are seeing welcome signs that inflation is coming down as well. It’s a good time to be a worker in America.'