Payroll growth slowed in December but was still better than expected, a sign that the job market remains strong even as the Federal Reserve tries to rein in economic growth.

Nonfarm payrolls increased by 223,000 for the month, above the Dow Jones estimate of 200,000, while the unemployment rate fell to 3.5%, 0.2 percentage points below the expectation. Job growth marked a small decline from the gain of 256,000 in November, which was revised down by 7,000 from the initial estimate.

Wage growth was lower than expected in an indication that inflationary pressures may be weakening. Average hourly earnings were up 0.3% for the month and were up 4.6% from a year earlier. The respective estimates were for growth of 0.4% and 5%.

Construction workers at a site in Philadelphia on December 21, 2022.Matt Rourke/AP File

By sectors, leisure and hospitality lead with 67,000 jobs added, followed by health (55,000), construction (28,000) and social assistance (20,000).

Stock market futures rose after the release, as investors look for signs that the job market is cooling and inflation is reducing as well.

The relative strength in job growth comes despite repeated efforts by the Fed to slow the economy, particularly the labor market. The central bank raised its benchmark interest rate seven times in 2022 by a total of 4.25 percentage points, with more hikes likely on the way.

Primarily, the Fed seeks to close the gap between demand and supply. As of November, there were about 1.7 job openings for every available worker, an imbalance that has persisted despite Fed rate hikes. Strong demand has pushed wages up, though they have mostly not kept pace. rate of inflation.

The drop in the unemployment rate came as the labor force participation rate rose to 62.3%, still one percentage point below February 2020, the month before the Covid-19 pandemic.

A broader measure of unemployment that takes into account discouraged workers and those holding part-time jobs for economic reasons also declined, falling to 6.5%, its lowest reading in a data set dating back to 1994. The overall unemployment rate is tied for the lowest level since 1969.

This is a developing story. Please check for updates.