RALEIGH – Friday’s U.S. jobs reports show many positives – from growth in jobs to a drop in unemployment to labor participation rate – leaving economists such as Dr. Mike Walden of N.C. State wrestling to get a handle on the report’s impact.

Walden stuck by his prediction earlier this week that a recession would hit and in North Carolina drive unemployment numbers up by 2 percentage points – some 50,000 jobs lost. Why? Because the Federal Reserve will continue to drive up interest rates in its fight against inflation.

But Friday’s report also reinforced another prediction he has talked about before – an economic slowdown but few jobs lost nationally.

In his words:

“The continuing strength of the labor market makes it virtually a certainty the Federal Reserve will keep pushing interest rates higher – I think by another two percentage points. As a result, the cost of borrowing will continue to rise.

December job gains outpace expectations, again – economy added 233,000 jobs

“But besides the fact that a growing labor market helps workers, there may be another upside to this report.  There’s been a debate among economists as to whether the Federal Reserve (the Fed) could pull off a so-called soft landing in the economy.  This means the Fed’s interest rate hikes would continue moderating the inflation rate, but without plunging the economy into a recession.

” The fact that the Fed’s substantial rate hikes to date – of over 4 percentage points – have not caused job losses and higher unemployment, can be read as evidence that a “soft landing” is within reach.  But even if an official recession sometime in 2023 is called, it could be the first recession in memory with no job losses.”

Walden says the jobs data shows the labor market “remains healthy.”

“Both job reports – the establishment report which looks at jobs at business, and the household report which asks individuals if they have a job – showed job gains.  This is not always the case, as recent reports have shown,” he explains.

UNC economist: Today’s jobs report signals a recession is coming in 2023

“The job gains at businesses in December were smaller than in November, but still was a robust increase of 223,000 jobs.  The gain in jobs reported by households was the first increase since September.  The unemployment rate also fell, and the labor force participation rate rose.

 “These numbers all show the labor market continues to be healthy.   In my view, the switch from job losses in the household survey to job gains was the most important indicator. “

Walden also says the figures are subject to further analysis and possible revisions.”We should remember that, although the December numbers are adjusted for typical seasonal changes – in this case, holiday buying – these adjustments can be inaccurate,” he notes.

“For example, if holiday buying was greater than the seasonal adjustment assumed, then the December numbers could be  artificially positive.  This is why it is important to remember that one month of data does not make a trend. We need to watch for supporting data in future months.  But still, the economy may be in a situation where the typical rules don’t apply.  If inflation can be reduced – with or without a recession – but the job market doesn’t crash, then this would be a monumental achievement.”

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