Wall Street likes good jobs report + waning inflation. Happy Friday, all!

The last month of 2022 capped off a second straight strong year for Americans getting jobs. This was confirmed with today’s US jobs report, which not only showed that growth continued, but also that inflation from the labor side was under control.

According to the Bureau of Labor Statistics, the economy added 223,000 jobs in the final month of 2022, less than the 256,000 in November. Unemployment fell to 3.469%, which economists say is the lowest since 1969.

Meanwhile, average hourly wages increased 4.6% on an annual basis, less than the 5% economists expected. On a monthly basis, that was a gain of 0.3%, compared to Dow Jones expectations of 0.4%. The November wage gains were revised lower to a monthly gain of 0.4%, versus 0.6% previously reported.

“This may be the last hoorah. It’s about as close to a Goldilocks number the Fed could hope for at this point in time,” said Diane Swonk, KPMG chief economist. “You had a cooling in wage gains with an increase in participation and a fall in the unemployment rate. You hit it on all three notes.” ….

“We’ve got 4.5 million new payrolls for the year. That’s the second strongest year on record,” said Swonk. She said 2022 was second to 2021, when there were 6.7 million jobs created. “The only thing close was 1946 when soldiers returned to civilian work after World War II.” Mark Zandi, chief economist at Moody’s Analytics, said the report is encouraging and confirms his expectation that there will be a soft landing for the economy. “It was about as perfect a report as one could ask for,” he said. “I don’t think there were any blemishes at all in the report. It shows a job market that is slowly but surely cooling off.”

Nice situation, eh? University of Michigan economist Justin Wolfers gave even more perspective of the Biden boom in the jobs market.

Looking across industries, it sure looks like some of this job gain is occurring in the sectors you would expect to benefit from the economy re-opening and returning to normal (Of extra note is that construction jobs grew, despite the Fed.) pic.twitter.com/Ix2Rji9WUA

— Justin Wolfers (@JustinWolfers) January 6, 2023

Lemme draw a line under today's jobs report: Rapid job growth, record low unemployment, and wage growth running at levels likely to cool inflation is an astonishing trifecta of good news.

— Justin Wolfers (@JustinWolfers) January 6, 2023

Oddly, the stock market also liked other reports from today that indicated overall economic activity was slowing and possibly recessing.

U.S. services industry activity contracted for the first time in more than 2-1/2 years in December amid weakening demand, while the pace of increase in prices paid by businesses slowed considerably, offering more evidence that inflation was abating.

The Institute for Supply Management (ISM) said on Friday its non-manufacturing PMI dropped to 49.6 last month from 56.5 in November. It was the first time since May 2020 that the services PMI fell below the 50 threshold, which indicates contraction in the sector that accounts for more than two-thirds of U.S. economic activity….

Economists polled by Reuters had forecast the non-manufacturing PMI slipping to 55.0.

The weakness in the services sector came in the wake of another ISM survey this week showing manufacturing slumping for a second straight month in December.

The final result, the DOW went up 700 points on the first Friday of the year, resulting in a weekly gain to start 2023.

That’s nice to see after 2022 saw the worst stock performance in 14 years. But now will the Fed get the hint and stop hammering down on an economy that is already moderating and nearing the point of tipping over?

I anticipate next week will see Jerome Powell or some other central banker saying something stupid based on data from 6 months ago that isn’t relevant to the reality of 2023, and that’ll likely keep today’s rally from being sustained too long. But the jobs report and up day on Wall Street gave a nice feeling to have going into the weekend, so we’ll take it for now.