December Jobs Report Beats Expectations: What the Experts Are Saying

Ordinarily, stronger-than-expected hiring would spook the market, but slowing wage growth caused stocks to pop.

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The December jobs report blew past economists' expectations and the unemployment rate fell, but evidence of cooling wages caused equity markets to rejoice Friday.

In other words, good news was actually taken as good news for a change. 

Nonfarm payrolls increased 223,000 last month, while the unemployment rate dipped to 3.5% from 3.7%, the Bureau of Labor Statistics reported Friday (opens in new tab). On an unrounded basis, the unemployment rate came in at 3.468%, or the lowest level since 1969 (opens in new tab), according to University of Michigan economist Justin Wolfers (opens in new tab)

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Economists were looking for the economy to add 202,000 new jobs in December, per a survey by Bloomberg (opens in new tab), and for the unemployment rate to remain unchanged. 

The Federal Reserve has been raising interest rates (opens in new tab) at the most aggressive pace since the late Carter and early Reagan administrations in a bid to tame the worst inflation (opens in new tab) in four decades. As such, stronger-than-expected job growth is usually taken as bad news by market participants. However, cooling wage growth suggests that labor market inflationary pressure might be easing.

Average hourly earnings increased 0.3% month-to-month in December, vs. a forecast for a gain of 0.4%. On a year-over-year basis, average hourly earnings rose 4.6%, vs. expectations of 5.0% growth. 

Market reaction was immediate and bullish, with all three major indexes gapping up sharply at the opening bell. By Friday's close, the blue-chip Dow Jones Industrial Average gained 2.1% to finish at 33,629, while the broader S&P 500 rose 2.3% to 3,895. The tech-heavy Nasdaq Composite added 2.6% to close at 10,569. 

With the December jobs report now a matter of record, we checked in with economists, strategists, investment officers and other market pros to see what they had to say about the state of the economy, markets and the Fed's path going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below: 

  • "The release was a win-win from the Fed's perspective, as it signaled that wage inflation is moderating while job growth remains steady. Coupled with the fact that headline inflation continues to move in the right direction, there's a growing chance the Fed may be able to navigate a soft landing in the economy. If it meets its target, 2023 could be one of the best years for markets given the amount of negative investor sentiment currently weighing on prices." – Peter Essele, head of portfolio management at Commonwealth Financial Network (opens in new tab)
  • "This morning's job report offered something for everyone. The report surprised to the upside but wage growth slowed, which will help bring inflation down. The unemployment rate came down to 3.5% because of an uptick in the participation rate. More workers are coming back into the workforce. The report was better than feared and finally, there is good news for investors." – Gina Bolvin, president of Bolvin Wealth Management Group (opens in new tab)
  • "The report helps to underpin the Fed's goal to moderate the ability of workers to demand higher wages, and create a balance within the labor market. Small business owners have been reporting that demand for higher wages has eased. Wages are a significant input cost for companies, and a cost that employers hope to pass along to the end consumer with higher prices. Overall this report indicates that the labor market remains resilient, but lower wage growth indicates that the Fed's campaign to thwart inflation is working." – Quincy Krosby, chief global strategist at LPL Financial (opens in new tab) 
  • "The average hourly earnings number came in lower than expected and this could be viewed positively by the market. We continue to be concerned that although inflation is coming down from its highs, it won't come down far enough to meet the Fed's 2% target, unless the job market gets significantly weaker. As a result, we believe the Fed is going to take rates higher for longer than the market currently expects. Any rallies are likely to be short-lived and as long as the market doesn't price in the pain that will be required to break the back of inflation, we aren't likely to exit this bear market (opens in new tab)." – Chris Zaccarelli, chief investment officer at Independent Advisor Alliance (opens in new tab)
  • "A tight labor market is both good news and bad news. The good news is consumer incomes will likely support spending, despite inflation pressures. The bad news for markets is the Federal Reserve will continue to tighten monetary policy. Given the long and variable lags in monetary policy, the Fed will likely further downshift the pace of rate hikes and will likely increase rates by 0.25% at the next meeting as inflationary pressures abate." – Jeffrey Roach, chief economist at LPL Financial
  • "A better-than-expected jobs report, capping off a year of excellent job growth, suggests the U.S. was not in a recession (opens in new tab) in late 2022. Other data are less upbeat; PMI surveys show the private sector may have contracted in late 2022, the Conference Board's Leading Economic Index has been pointing to a recession ahead for a few months, and continuing jobless claims are up by more than a quarter over the last six months, a rate of increase usually observed only during recessions. But if today's jobs data go unrevised, the committee of economists who determine recession dates is unlikely to call late 2022 a recession. Inflation has peaked in the U.S. and continues to slow, with energy prices (opens in new tab) down from their peaks last summer, shortages of most goods ending, and house prices falling. If the good news keeps coming on inflation, the Fed could pivot to rate cuts in late 2023. But December's strong jobs report shows that the pivot is not just around the corner. The Fed's next move will probably be a quarter percentage point hike at their first meeting of this year, concluding February 1." – Bill Adams, chief economist at Comerica Bank (opens in new tab)
  • "The U.S. jobs report had a little something for everyone: plenty more jobs and better job prospects for the unemployed, but also somewhat slower wage growth and a pullback in work hours that suggests the economy is losing steam. Alas, a hawkish Fed will likely fret more about the ongoing tightness in labor markets." – Sal Guatieri, senior economist at BMO Capital Markets (opens in new tab) 
  • "For an investor, this report went about as well as it could have gone. If our goal in the next several months is to have this soft landing, where the economy continues growing, but at a slower pace and inflation continues to slow, this was a good report for that scenario. And that's the scenario the market is hoping for. Investors are worried about two things: interest rates (which have been the primary driver of markets for the last year) and a recession. On the issue of interest rates, one bit of information I see is that it looks like wage growth is continuing to slow. That goes to the inflation and interest rate concern. You will still have the Fed acting to raise rates to slow things down, but the fact it looks like some of the inflationary pressures are continuing to fade, that makes you feel good about the Fed having an end date sooner rather than later. In terms of a recession, it would be an odd recession indeed when we see unemployment falling, which we did. And you have job numbers coming back higher than expected. In terms of these numbers, you really don't see signs we're headed into a typical recession. Those are not recession numbers. So economically, these numbers would make you feel good. They're not pointing to an immediate recession and they're not pointing to interest rates going to the sky." – Tim Courtney, chief investment officer at Exencial Wealth Advisors (opens in new tab)
  • "Another blockbuster employment report to end 2022 on an upside for the U.S. economy. This means that the Federal Reserve (Fed) still has some work to do in order to slow economic activity. However, there were several sectors of the economy that were showing weakness in employment while earnings were weaker than expected and remained on a downward trend, which is what the Fed wants to see. Perhaps the biggest surprise from the employment report was the strength and resilience of construction employment in the face of the weakness we have seen in the U.S. housing market." – Eugenio Alemán, chief economist at Raymond James (opens in new tab) 
  • "It's a mixed bag between the unemployment rate dropping lower to 3.5% and wage growth slowing further. The jobs report has become the stepchild to next week's more anticipated Consumer Price Index (CPI) report, and I think it'll be the combination of the two that will inform the Fed. Today's NFP data suggests the Fed could get its immaculate disinflation, where wages ease and so does inflation without the labor market deteriorating. I'm skeptical of this though because it has never happened before. Also, the number of goods producing jobs jumped significantly last month after falling or barely growing over the past 6 months. This could challenge the bond market's narrative that there is goods disinflation that is offsetting the services inflation, and that will bring inflation down to prompt a Fed pivot." – Megan Greene, global chief economist at the Kroll Institute (opens in new tab)
  • "The December employment report was generally encouraging. Nonfarm payroll growth slowed modestly but remained solid with a 223,000 monthly gain. More importantly for Fed officials worried about the inflation outlook, wage growth cooled in December, and the labor force participation rate ticked higher for both prime age (25-54) and older (55+) workers. Despite the directional improvement in labor supply, the labor market remains exceptionally tight. The unemployment rate fell two tenths of a percentage point to 3.5%, matching its lowest level on record since 1969. It will take more than just this report to convince the FOMC that supply and demand in the labor market are in healthy balance." – Sarah House, senior economist at Wells Fargo Economics (opens in new tab)
  • "The labor market showed resilience and strength last month, but we are seeing some high-profile layoff announcements in the new year. The average hourly earnings decline should give the Fed some solace that they can continue to slow the pace of tightening." – Eric Merlis, managing director, co-head of global markets at Citizens (opens in new tab)
  • "Jobs came in stronger than expected on both the nonfarm payrolls report and the ADP private report. The unemployment rate came in lower than expected, falling back down to 3.5% on increased labor force participation. The equity markets overlooked this data and focused on the softer-than-expected average hourly earnings, which came in at 0.3% month-over-month for December and 4.6% year-over-year. The 4.6% annual wage growth in December was the lowest since August 2021. This will be welcomed news by the Fed, but still shows serious labor market tightness. The Fed's been clear in their communications that they are more comfortable going at a pace of 0.25% increases to interest rates here, given the front-end heavy lifting they did in 2022. Barring a huge upside surprise in CPI, I think that's pretty much a done deal." – John Luke Tyner, portfolio manager at Aptus Capital Advisors (opens in new tab)
  • "As we close out 2022 amid recession concerns and significant layoffs in the tech industry, it is encouraging to see a strong jobs report. We expect the unemployment rate to remain below the natural rate of 4.5% in 2023. Still, we will continue to pay particular attention to factors that could impact the jobs market, such as the higher fed funds rate, inflation and geopolitical issues. As the Fed begins to scale back its aggressive rate hikes, following a series of 75-basis point [0.75%] increases to a 50-basis point [0.5%] increase in December, we are optimistic this slight slowdown will curb economic volatility. Ideally, the economy will reach a goal of 2% inflation, 2% economic growth and a natural rate of unemployment of 4.5% by 2024." – Steve Rick, chief economist at CUNA Mutual Group (opens in new tab)
  • "Today's December jobs report contradicts both the message from consensus and the U.S. Treasury yield curve. This report should add to investor confusion and heighten market volatility in the weeks ahead. It also complicates the Fed's battle against inflation, though the minutes from the December monetary policy meeting reiterate the committee's resolve. A 50-basis point move is back on the table for the next FOMC meeting in a few weeks. The long-end of the Treasury yield curve appears to be pricing in a pivot in policy this year, a step we view as unlikely. Equities should remain volatile in the first half of 2023 until investors get comfortable with a trough in gross domestic product (GPD) and earnings per share (EPS), along with a peak in rates. As markets begin to price in recovery by mid-year, we look for 5.0% EPS gains in 2024 to result in a fair value of 4,150 for the S&P 500 index by year end." –  John Lynch, chief investment officer at Comerica Wealth Management (opens in new tab) 
  • "We believe that the moderation in employment conditions will continue, as parts of today's report show, but we think there is still a stickiness to the labor demand in services, which will persist for a while. Ultimately, this makes the Federal Reserve's job of slowing demand for employment and reducing high wages, and thus stubbornly high levels of inflation, harder from here." – Rick Rieder, BlackRock's chief investment officer of Global Fixed Income (opens in new tab) and head of the BlackRock Global Allocation Investment Team
Dan Burrows
Senior Investing Writer, Kiplinger.com

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.


A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.


Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.


In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics and more.


Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.


Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.