WASHINGTON — The job market in the United States experienced a significant upswing last month, showing a surprising robustness as unemployment rates decreased. This development may pose challenges for homebuyers and businesses that had been anticipating a decline in interest rates to alleviate the costs of major purchases such as homes and appliances.
According to the Labor Department’s latest report, employers created 256,000 new jobs in December, an increase from the 212,000 recorded in November. The unemployment rate, expected to remain around 4.2%, actually dropped to 4.1%. The health care sector contributed notably with the addition of 46,000 jobs, followed by retail at 43,000 and government positions at various levels adding 33,000 jobs.
This final jobs report for 2024 highlights an economy that continued to grow steadily, defying the potential impact of significantly higher interest rates compared to the pre-pandemic era. As a result, it appears less likely that the Federal Reserve will lower borrowing costs in the near future. Last year, the Fed had reduced its rate three times, largely out of concern for a potential slowdown in hiring and economic growth.
The positive job data indicates that the economy is transitioning into a period of stable growth post-COVID, accompanied by low unemployment and modest inflation. Joe Brusuelas, the chief economist at RSM, remarked that there is little justification for further cuts to the Fed’s rate anytime soon.
He added that the economy is likely to experience a higher growth trajectory, driven in part by improved productivity, which could lead to increased consumer spending. However, this heightened demand may also result in rising inflation. “The economy is poised to grow at a more elevated equilibrium level, suggesting higher inflation rates and corresponding interest rates compared to the stability seen from 2000 to 2020,” Brusuelas explained.
Throughout 2024, the United States added a total of 2.2 million jobs, a decline from the 3 million jobs created in 2023. This job creation has decreased from 4.5 million in 2022 and an unprecedented 6.4 million in 2021, as the economy rebounded from the COVID-19 pandemic. Nevertheless, last year’s monthly average of 186,000 new jobs still slightly surpasses the pre-pandemic monthly average of 182,000 from 2016 to 2019, indicating solid economic health.
However, U.S. markets reacted negatively to the December jobs report, as investors perceived that the chances of further rate cuts had diminished. For many Americans, high interest rates continue to pose significant challenges when purchasing homes, vehicles, and even appliances. Mortgage rates have been on the rise, experiencing four consecutive weeks of increases, reaching the highest levels seen since July.
Hourly wages saw a modest increase of 0.3% from November and 3.9% compared to the previous year, although this annual increase fell short of economists’ expectations.
The resilience of the U.S. economy and job market has been a surprise to many. In response to inflation that surged to a 40-year high two and a half years ago, the Federal Reserve raised its benchmark interest rate a total of 11 times in 2022 and 2023, bringing it to its highest level in over two decades. Contrary to expectations, a recession never materialized—companies continued hiring, and consumer spending remained robust, with the U.S. gross domestic product growing at an impressive annual rate of over 3% in four of the last five quarters.
Inflation has also decreased significantly, falling from a peak of 9.1% in June 2022 to 2.7% in November. This reduction in the rate of price increases has allowed the Fed to enact three rate cuts in the latter part of 2024.
However, Fed officials indicated in December that they would adopt a more cautious approach to rate cuts for 2025, now projecting only two reductions instead of the previously anticipated four. Progress in combating inflation has stalled, remaining above the Fed’s target of 2%.
President Joe Biden stated that while more work is needed to reduce costs, actions have been taken to lower prices on crucial areas such as prescription drugs, health insurance, utilities, and gas. “This has been a challenging recovery, but we’ve achieved progress for working families, demonstrating what can be accomplished when we focus on building the economy from the middle-out and bottom-up,” he remarked.
As he prepares to hand over the reins to President-elect Donald Trump, Biden’s administration is leaving behind an economy that is largely strong, despite the financial pressures many Americans have faced over the past three years.
In the current job market, many businesses still struggle to fill positions. Optimism for 2025 is reflected in the plans of Matt Harding, the chief concept officer at Piada Italian Street Food, who aims to open seven new locations and hire 250 additional employees this year. The fast-casual restaurant chain, based in Columbus, Ohio, presently operates 58 outlets across seven states and employs 1,200 workers. To reduce turnover, they have increased hourly pay by 35% to 40% since 2020, with starting wages reaching up to $16.45.
UCHealth, a nonprofit healthcare system managing hospitals and clinics in Colorado, Wyoming, and Nebraska, faces challenges in recruiting skilled clinical staff, including nurses and therapists. Angela Spinelli, the senior director of talent acquisition, noted, “The market remains strong for these roles.” UCHealth hired 9,400 workers last year and currently has 1,200 openings. They have responded by increasing wages and focusing on internal training programs to help employees transition into higher-skilled positions.
For some, job searching remains a daunting experience. After being unemployed for 20 months due to the failure of a startup, Mike Pincus, 55, who spent 35 years as a personal trainer, found it difficult to identify a new career direction. “I wasn’t sure exactly what I wanted to do, but I had clarity on what I didn’t want,” he explained. The search was often frustrating, as he felt many employers relied heavily on algorithms to filter non-traditional applicants. “If a human looks at your resume, it’s often just a quick glance,” he shared. His fortunes changed when he applied for a managerial position at Trek’s bike shop in Ventura, California—a job that brought him joy and fulfillment despite being unexpected.
“I love it,” Pincus said, reflecting on his new role. “I didn’t know I would enjoy it so much, or that I could excel in it.”
