U.S. payrolls grew by 216,000 in December and the jobless rate held steady at 3.7%. Jeff Sparshott and Greg Ip here to take you through the Labor Department's latest snapshot of the economy.

December’s 216,000 rise in payrolls was stronger than Wall Street expected, and the unemployment rate stayed at a very low 3.7%; Wall Street expected an increase. And yet the overall picture shows the job market is not heating up again, but maintaining a healthy tempo. With October and November revised down, private payrolls growth averaged just 115,000 in the last three months. That’s tied for the lowest since mid-2020, but still above the long-run equilibrium rate given underlying demographics. And while healthcare, government, leisure and hospitality again accounted for the lion’s share of job growth, 59.6% of all private industries added workers, a relatively healthy breadth. —Greg Ip

Today's jobs report doesn't scream "change your policy stance immediately" for the Federal Reserve. In fact, it doesn't change much of anything and instead highlights the big swirl of uncertainty facing monetary policymakers this year. If officials were worried about the lagged impact of their rate hikes, they probably can still worry about that—see how the revisions continue to occur in the direction of fewer jobs. If they were worried about overheating, they can probably worry a little less because private-sector hiring is at its lowest level of the year (using a three-month moving average) and the index of aggregate weekly payrolls, which combines hiring, wages, and hours worked for private-sector employees, is running around 4.3% at a three-month annualized rate, well below 5%-6% rate seen earlier in the year. —Nick Timiraos

Hopes that inflation has been defeated didn’t get much support in December’s report. Average hourly earnings grew 0.44% from November and 4.3% at an annual rate in the last three months, up from 3.2% in October. Annual wage growth seems to have stabilized around 4%, about 0.5 percentage point faster than is consistent, over time, with the Fed’s 2% inflation target. 

More troubling was the 676,000 plunge in the labor force. Partly that reflects the inherent volatility of the household survey. That survey showed employment dropping 683,000, which is why the unemployment rate didn’t fall.

Nonetheless, the labor force seems to have stopped growing in the last three months and the participation rate has edged down. Either a cooling labor market is pulling fewer people off the sidelines, or the pool of eligible workers really is running low. —Greg Ip

For the full year, healthcare, social assistance and restaurant industries were big job creators, reflecting strong demand for the goods and services they provided.

Transportation, warehousing and temporary help shed jobs over the course of 2023, reflecting a bit of a postpandemic hangover after go-go hiring in 2021 and early 2022.

U.S. construction employment hit a fresh record despite the Fed's campaign to quash inflation by raising its benchmark interest rate to a 22-year high. Higher borrowing costs typically curtail construction activity. Instead, strong demand for new homes pushed residential building employment to its highest level since the 2007 housing bubble, and government subsidies (for semiconductor and battery factories, especially) have helped push nonresidential construction employment to an all-time high. Altogether, more than 8 million people are employed across the sector.

Overall, however, job gains have become more concentrated in a handful of industries—healthcare, social assistance and government accounted for 110,900 of the net job gains last month. Economists consider those sectors noncyclical, meaning that their growth doesn’t reflect underlying economic strength.

"The details of the report were mixed but what is clear is the labor market remains tight. We do not think the labor market is showing the slowdown needed for the Fed to cut soon and think a bumpy path ahead on inflation will keep the Fed from cutting before June." —Ellen Zentner, Morgan Stanley

"Today’s jobs report defies a steady stream of data pointing to a definitive slowing in the labor market. ... If the labor market continues to remain this robust, we could see broader price pressures and corporate pricing power reassert themselves after easing in late 2023—potentially leading to a second surge in broader inflation." —Aaron Terrazas, Glassdoor

"For Fed officials, these data—especially the uptick in wages—support the view that the policy rate needs to remain restrictive for some time. But we continue to think that rates are at a peak and the Fed’s next move will be a rate cut, likely by the middle of next year." —Rubeela Farooqi, High Frequency Economics

"Today's report speaks to the bumpy road ahead for the Fed's journey back to 2% inflation. ... The decision of when to first cut policy rates remains one for the second half of the year in our view." —Andrew Patterson, Vanguard

"Labor force participation fell off towards the end of the year, and wage growth re-accelerated—both signs that while labor demand may still be high, labor supply may be struggling to keep pace." —Nick Bunker, Indeed

"The 2.7 million jobs created during 2023 and a 3.6% average unemployment both point towards a rock-solid American household that will continue to support growth in 2024." —Joseph Brusuelas, RSM US

"Job growth has now averaged 165K over the last 3 months, just in line with the 2019 average of 164K. However, the Fed will likely be paying a lot more attention to the decline in labor participation and the uptick in wage growth." —Olu Sonola, Fitch Ratings

"Job creation remains solid, but persistently strong wage growth adds a wrinkle for policymakers that could push back against a near-term reversal in rate policy. For the time being, it appears that the Fed will be content with a 'steady as she goes' mindset." —Jim Baird, Plante Moran Financial Advisors

"The labor market is no longer as tight as it was earlier in the recovery as signaled by slower job growth, less turnover and slower wage gains. That said, job growth remains solid on an absolute basis even if it has slowed on a relative one." —Sarah House, Wells Fargo

Real Time Economics comes to you from WSJ reporters and editors around the world. Today's issue was curated and edited by Jeff Sparshott, Greg Ip and Miguel Gonzalez in Washington, D.C.

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