Prime Highlights:
Nonfarm payrolls increased by 256,000 in December, surpassing the 155,000 forecasts.
The unemployment rate fell to 4.1%, slightly below expectations.
Average hourly earnings rose by 0.3% in December, with a 12-month increase of 3.9%.
Key Background:
U.S. job growth exceeded expectations in December, with nonfarm payrolls rising by 256,000, significantly surpassing the 155,000 forecast and up from 212,000 in November, according to the Bureau of Labor Statistics. This robust employment increase reflects a labor market still operating with strength despite concerns over a potential slowdown.
The unemployment rate edged down to 4.1%, just below the expected 4.2%. Additionally, a broader measure of joblessness, which includes discouraged workers and those working part-time for economic reasons, dropped to 7.5%, the lowest level since June 2024.
The report indicates a strong labor market, which may reduce the likelihood of aggressive interest rate cuts by the Federal Reserve in the near future. With inflation remaining persistent, particularly in housing costs, the Fed is closely monitoring labor market conditions. Average hourly earnings rose by 0.3% in December, in line with expectations. However, the annual wage growth of 3.9% was slightly lower than anticipated, signaling that wage inflation may be cooling.
The report comes at a crucial time as the Federal Reserve considers its next steps on monetary policy. After its December meeting, the Fed raised interest rates by a quarter percentage point and signaled slower cuts ahead. Following December’s jobs data, markets adjusted expectations, now anticipating just one rate cut for the year.
Notable sectors contributing to job growth included healthcare (up 46,000), leisure and hospitality (43,000), and government (33,000). Retail also experienced a rebound, adding 43,000 jobs after a slight loss in November. Despite strong overall job growth, revisions to prior months’ data were modest, with October’s numbers revised upward by 7,000 and November’s revised downward by 15,000. Overall, the December jobs report paints a picture of a resilient labor market, giving Federal Reserve policymakers a bit more confidence as they navigate inflation concerns and potential interest rate moves in 2025.
