WASHINGTON — U.S. employment showed an unexpected surge in December as companies collectively added a robust 256,000 jobs, highlighting the economy’s continued strength despite elevated interest rates.
The Labor Department’s report indicated that job growth rose by 212,000 compared to November.
Over the course of 2024, the economy generated 2.2 million jobs, which is a healthy figure but less than the 3 million jobs created in 2023, 4.5 million in 2022, and a record 6.4 million in 2021, following the significant job losses resulting from the pandemic.
The monthly employment figures exceeded analysts’ projections, which anticipated an increase of approximately 155,000 jobs and an unemployment rate of 4.2%. Notably, the healthcare sector contributed 46,000 new jobs, retail added 43,000, and government bodies at various levels added 33,000 positions. However, manufacturing saw a decrease, losing 13,000 jobs.
Further revisions by the Labor Department adjusted October and November’s job figures downward by 8,000 combined.
Average hourly earnings saw a 0.3% uptick from November and a year-over-year increase of 3.9%. This annual wage growth was slightly lower than what economists had expected.
Following the release of this positive jobs report, stock prices fell in the early trading hour, as analysts speculated that this may deter the Federal Reserve from lowering interest rates. It suggests that the economy might not require such assistance. “It seems pretty certain that the pace of Fed rate cuts is now going to slow down,” remarked Brian Coulton, chief economist at Fitch Ratings.
Gaining a clear understanding of the U.S. employment landscape has been challenging in recent months.
The job figures for October were skewed due to hurricanes and a significant strike at Boeing, leading to lower numbers that were followed by a rebound in November which possibly overstated hiring growth.
Thomas Simons, chief U.S. economist at Jefferies, acknowledged potential influences from seasonal adjustments around the holiday period affecting December’s data, but he concluded that it is difficult to find any negative elements in the overall report.
The economy and job sector have displayed notable resilience over the past few years. In reaction to inflation reaching a 40-year high two and a half years ago, the Federal Reserve increased its benchmark interest rate 11 times during 2022 and 2023, bringing it to its highest level in over 20 years.
These increased borrowing costs were generally expected to trigger a recession; however, that didn’t occur. Businesses persisted with hiring, consumers continued their spending, and the economy maintained a robust pace. In fact, the U.S. gross domestic product has grown at an impressive annual rate exceeding 3% in four out of the last five quarters.
American employees currently enjoy remarkable job security, with layoffs occurring at a rate below that seen before the pandemic. On Thursday, the Labor Department noted that only 211,000 individuals applied for unemployment benefits last week, marking the lowest figure in nearly a year.
Inflation has also seen a decline, dropping from a peak of 9.1% in June 2022 to 2.7% in November. This decrease in year-over-year price inflation has given the Fed the confidence to implement three rate cuts in the last four months of 2024.
Nonetheless, Fed officials have indicated during their December meeting that they intend to exercise caution concerning rate reductions in the upcoming year. Their current outlook includes only two anticipated rate cuts in 2025, down from four projected in September, reflecting a noticeable stall in progress against inflation, which continues to hover above the Fed’s target of 2%.
