A recent report released by JLL pointed out that national labor market data from November 2022 sent conflicting signals. While the net job gains of 263,000 represented “the smallest gain since April 2021, it came in well above expectations,” according to the JLL analysis. Office-using categories experienced small gains, while retail jobs declined, heading into the holiday season. Additionally, revisions to prior months deleted 23,000 from payrolls.

Also declining? Wage growth and number of open jobs. Meanwhile, weekly unemployment claims are rising, though slowly.

Despite all of this, consumers are still out there, spending money.

JLL Senior Economist Ryan Severino, who authored the report, said that under other circumstances, lower job and wage gains would be bad news. But with the goal of slowing inflation, a minor labor market reduction might not be such a bad thing.

“Ideally, the Fed would like to reduce excess demand for labor (as measured by, say, open jobs) without casing too much disruption to employment, (as measured by job losses, the unemployment rate, etc.) but that will be challenging to pull off,” Severino told Connect CRE.

Nor is Ray Perryman, president and CEO of The Perryman Group, surprised at the numbers. “Slowing job growth is the inevitable outcomes of the Federal Reserve’s actions to try to deal with inflation,” the economist told Connect CRE.

Even as the number of open jobs declined, labor shortages remain an main issue. Severino said that the shortage is especially prevalent in blue-collar jobs. “Shortages are likely to persist because of the demographic change,” he added. “As baby boomers retire, organizations are struggling to replace workers quickly enough.”

This is because the U.S. is running out of workers, due to the above-mentioned demographic changes. “Long-term demographic patterns are going to create challenges for decades to come,” Perryman noted.

Both economists are somewhat optimistic for the coming year. Perryman anticipates some relief from inflation, while “the numbers of serious COVID-19 cases are low enough to allow for essentially normal activity.”

But a lot depends on the Federal Reserve. “The real key is whether the Fed can slow the economy enough to tame the rate of price increases without causing a notable downturn,” Perryman said. “I remain optimistic that, if a recession occurs, it will be mild and brief.”

Severino also indicated that early 2023’s economic and job health will greatly depend on what the Fed does or does not do.

“We’ll have to see how aggressively the Fed pushes up rates,” He said. “There’s still a path for the economy to avoid a downturn, but it’s getting narrower.” How narrow? “If the Fed stops around 5%, it can be done,” Severino said. “If the Fed really pushes toward 6% or 7%, then we could be looking at temporary declines in spending and job losses.”