WASHINGTON — The past few months have made it challenging to assess the U.S. job market accurately.
Recent events, including hurricanes and a significant strike at Boeing, distorted the October employment figures, leading to a lower count that is likely to see an inflated rebound in November, making hiring appear stronger than it actually is.
The Labor Department is set to release December’s employment data on Friday, which should provide a clearer picture of current job market conditions.
Most economists predict that job creation will show stability but at a decelerating pace compared to the robust figures seen during 2021-2023.
Analysts surveyed by FactSet anticipate that payrolls increased by 153,000 in December, down from 227,000 in November and a mere 36,000 in October, which were impacted by strikes and hurricanes.
Boston College’s economist, Brian Bethune, has a slightly more hopeful outlook, estimating that December could see between 165,000 and 175,000 new jobs created.
He suggests that this figure would likely please Federal Reserve Chair Jerome Powell, striking a balance that avoids igniting inflation fears while not indicating a sluggish economy.
“If we hit that range, he’d probably relax and enjoy a good bourbon,” Bethune noted.
If projections hold for December, the American economy created around 2.1 million jobs over the past year, which, although less than prior years—3 million in 2023, 4.5 million in 2022, and a remarkable 7.2 million in 2021—still reflects solid performance as the economy adapted post-COVID-19 lockdowns and layoffs in 2020.
The unemployment rate is expected to have remained steady at a low 4.2% for December.
In recent years, both the economy and job market have shown unexpected resilience.
In response to inflation peaking at a 40-year high over two years ago, the Federal Reserve raised its key interest rate—known as the federal funds rate—11 times during 2022 and 2023, positioning it at the highest point in more than two decades.
Despite expectations that these elevated borrowing costs would trigger a recession, the opposite occurred.
Businesses continued to hire, consumers maintained their spending habits, and the economy persevered.
Indeed, the U.S. gross domestic product (GDP) has grown at a vigorous annual rate of 3% or greater in four of the past five quarters.
American workers currently enjoy a level of job security that is somewhat atypical; layoffs are below the levels seen prior to the pandemic.
On Thursday, the Labor Department noted that only 211,000 individuals filed for unemployment benefits in the previous week, the lowest in almost a year.
Inflation has also seen a decline, dropping from a peak of 9.1% in June 2022 to 2.7% in November.
This reduction in year-over-year price increases has given the Fed enough reassurance to reduce interest rates three times during the last four months of 2024.
However, during their December meeting, Fed officials indicated plans to approach rate cuts with more caution this year, now forecasting only two reductions in 2025, a drop from the four they anticipated back in September.
Recent advancements against inflation have stalled, with rates remaining above the Fed’s target of 2%.
Friday’s employment report is predicted to show that average hourly wages increased by 0.3% in December compared to November and 4% year-over-year since December 2023, according to the FactSet analysis.
The Federal Reserve often expresses concern that wage increases could stoke inflation as businesses seek to pass on higher labor costs to consumers through raised prices.
Nonetheless, Nancy Vanden Houten, lead U.S. economist at Oxford Economics, contends that the current pace of wage growth aligns with the Fed’s inflation objectives.
She attributes this to robust productivity gains in the U.S., allowing firms to pay their workers more and enhance profits without necessarily elevating prices.
“Earnings growth shouldn’t be a cause for concern for the Fed,” Vanden Houten remarked.
