The U.S. economy expanded at a solid annual rate of 2.9% in the fourth quarter of 2022, down from 3.2% at the end of Q3, according to the Commerce Department’s Bureau of Economic Analysis. Fourth-quarter growth was more than expected and capped a year of economic slowing that reflects a return to a more normal pace of growth. Nevertheless, concern continues that growth may turn negative in 2023. The increase in real GDP was driven by gains in private inventory investment, consumer spending, federal government spending, state and local government spending and nonresidential fixed investment that were partly offset by decreases in residential fixed investment and exports.  There was a decrease in imports, which are a subtraction in the calculation of GDP.

The growth in private inventory investment was led by manufacturing – mainly petroleum, coal products and chemicals – as well as mining, utilities and construction industries.

The increase in consumer spending reflected increases in both services and goods. Within services, growth was led by health care, housing, utilities and personal services.  

Within goods, the leading contributor was motor vehicles and parts. There was growth in non-defense federal spending and increases in state and local government spending that chiefly were due to more employee compensation. Within nonresidential fixed investment, an increase in intellectual property products was partly offset by a decrease in equipment. READ MORE >

Job growth slowed in December but was better than expected with notable gains occurring in leisure and hospitality, health care, construction and social assistance.

Nonfarm payroll employment increased by 223,000 in December and the unemployment rate edged down to 3.5% where it has remained in a narrow range to 3.7% since March. The number of unemployed persons declined to 5.7 million in December. But the number of workers out of a job from three to six months has risen sharply since last spring. In December, 826,000 unemployed workers had been out of work for about three-and-a-half to six months, up from 526,000 in April.

Demand for labor lately has been weakening fastest in white-collar industries. Microsoft Corp., Goldman Sachs Group Inc. and Google parent Alphabet Inc. recently announced job cuts. Additionally, fewer temporary workers have been getting called up as employment through staffing firms has dropped every month since July. Many economists view the sector as a bellwether for future shifts in the labor market. There are 38.5% fewer job prospects in software development than there were a year ago, according to job search site Indeed.com. Media jobs were down 30.8% and banking and finance postings were off 25.6%.

Among the major worker groups, the unemployment rate for Whites fell to 3% in December. The jobless rates for adult men was at 3.1% and 3.2% for women,10.4% among teenagers, 5.7% for Blacks, 2.4% for Asians and 4.1% for Hispanics.  The number of long-term unemployed – those jobless for 27 weeks or more – declined by 146,000 to 1.1 million in December. This measure is down from 2.0 million a year earlier. The long-term unemployed accounted for 18.5% of all unemployed persons. READ MORE >

After raising interest rates seven times in 2022 to their highest level in 15 years, the Federal Reserve has signaled its nascent confidence that inflation will ease in 2023 enough for central bank policymakers to begin slowing rate hikes.

In December, the Fed increased the overnight borrowing rate a half point to between 4.25% and 4.5%.  Several central bank officials said after the increase, which followed four three-quarter point jumps, that they saw rates rising to a peak between 5% and 5.25%, a sign that two more quarter-point hikes were likely. 

The rate hike came after the Labor Department reported that the 12-month consumer price index dropped to 7.1% and the core rate, which excludes food and energy, was at 6%.  Both indexes were at their lowest in a year. The personal consumption expenditure price index had fallen to 5%. The Fed’s inflation goal is 2%. 

Central bank officials said they believe that dialing back increases to the more traditional quarter percentage point will provide more time to assess the effects of previous increases and determine where to stop with greater accuracy. 

Federal Reserve Chairman Jerome Powell said the inflation data that influenced the smaller December rate hike “show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to have confidence that inflation is on a sustained downward path.” READ MORE >