Interest rate increases have directly affected the labor market by taking the air out of the tech sector; the information services category dropped 5,000 jobs in December. That doesn’t include the bulk of 18,000 recently announced layoffs at Amazon, or the 8,000 at Salesforce.
Rising borrowing costs have also hamstrung home sales, resulting in sharp cuts at mortgage brokerages. But in an example of how backlogged demand is still powering even industries sensitive to interest rates, construction employers have continued to add jobs at a solid pace.
That could change soon, as order books stabilize. Erica Goodnight runs a lumber supplier in Harmony, N.C., that serves people building backyard sheds, barns and other outbuildings. The company did brisk business as homeowners added more space during the pandemic, but this year Ms. Goodnight is sitting tight on hiring.
“We’ve found a sweet spot,” Ms. Goodnight said. “I don’t necessarily foresee any openings. And honestly I think a lot of companies, if the employee will stay and show up for work, they’re not removing positions, because they got burned when they laid off employees in the beginning stages of Covid, and those folks didn’t come back.”
That steady easing is also evident in the number of hours the average worker puts in each week, a figure that has been falling for months and is now on the lower end of its prepandemic range.
Understand Inflation and How It Affects You
Fed officials watch wage increases closely, concerned that they will continue to propel inflation as spending shifts from goods to services, where salaries largely drive prices. The cooler number in December may provide some reassurance that they can continue the path of stepping down interest rate increases that the Fed chairman, Jerome H. Powell, communicated last month as inflation also subsided.
“That sort of orderly progression suggests that the economy is moving in ways that we will start to see that imbalance disappear,” Raphael Bostic, a Fed governor, said at a conference of economists in New Orleans on Friday, while cautioning that he expected rates to remain high throughout 2023.
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