U.S. adds 223K jobs in Dec; wage growth slows

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STORY: The U.S. economy added 223,000 jobs in December, pushing the unemployment rate back down to 3.5%, as the labor market continues to show resilience despite the Federal Reserve's efforts to slow economic growth in its fight against inflation.

But the Labor Department's closely watched employment report on Friday marked a small decrease from the 256,000 jobs gained in November, which was revised down from the initial estimate of 263,000.

Glassdoor's chief economist Aaron Terrazas explains.

"I mean, today's jobs report shows that the labor market is slowing, but not so dramatically and not crushing, more importantly. There have been so many fears that higher interest rates, high profile layoffs would lead to a really dramatic crash in the labor market. And that's not what we're seeing. And job growth remained robust. It's above its long term trend, but down from November. More importantly, the unemployment rate fell. It's now back at the lows that it has touched this cycle. And equally, wage growth slowed. I think that final point is what most economists were hoping to see, and particularly inflation hawks. Wage growth slowed to 4.6%, which is the slowest we've seen since August of 2012."

U.S. stocks opened higher on the deceleration in wage growth, as investors hoped it would reduce the risk of the Fed lifting interest rates further and for longer.

"I think there was fears in some respect that this would really be a blowout report. It was a good report. It wasn't a blowout report. And so I think kind of that's how we're seeing markets react in this relatively muted fashion. On top of that, you know, there were promising signs in that slowing wage data. And I think that's that's a hopeful signal for markets... We can't get too far ahead of ourselves. It's easy for markets to get ahead of themselves with any any hints of positive data. But certainly the trend is moving in the right direction for for the Fed."

Wage growth could pick up in January as several states raise their minimum wage and most workers across the country get cost of living adjustments.

The trend in employment growth, however, could slow significantly by mid-year as the Fed's rate hikes make credit more expensive, weighing on consumer spending and ultimately business investment.