The U.S. labor market just finished a year that many thought would see a recession with one of the highest 12-month job totals seen in the last decade.
Including an unexpectedly strong December report, the U.S. labor market added a total of nearly 2.7 million jobs in 2023.
Excluding outsized gains from the rebound from pandemic-era firings and rehiring in 2021 and 2022, the most recent year was the most robust for job increases since 2015 and the third highest since 2000.
“The key reason why economic activity surpassed expectations in the U.S. and actually, globally, is the fact that labor market resilience was a key feature of the economic landscape,” EY chief economist, Greg Daco, told Yahoo Finance. “Businesses, business executives, were keenly focused on ensuring that they had the right talent to navigate this very unusual period of impact.”
Entering the year, many economists believed the Federal Reserve’s aggressive interest rate hikes would slow the labor market as companies looked to cut expenses and protect profits as the cost of capital increased. But that didn’t fully come to fruition.
“You look at these very rapid rate increases, and you’re assuming that means there’s going to be these kind of catastrophic impacts on the economy,” Jefferies U.S. Economist Thomas Simons recently told Yahoo Finance.
“But in reality, both the household and the corporate sector are much more insulated from rate hikes than it appeared, and certainly than they have been in previous rate hiking cycles, based on just how they fund their activity.”
This unusual reaction to rate hikes, combined with employers struggling to rehire workers after the pandemic, created an economic rarity. After the most aggressive federal interest rate hiking cycles in decades, the unemployment rate was nearly unchanged from where it sat when the Fed began hiking rates in March 2022.
Read the full report from Yahoo Finance here.
