The US economy in December added the most jobs since March and the unemployment rate unexpectedly fell, capping a surprisingly strong year and supporting the case for a pause in Federal Reserve interest-rate cuts.
Nonfarm payrolls increased 256,000, exceeding all but one forecast in a Bloomberg survey of economists. The unemployment rate fell to 4.1%, while average hourly earnings rose 0.3% from November, a Bureau of Labor Statistics report showed Friday.
Treasury yields and the dollar surged and S&P 500 futures sank following the release as traders pushed back expectations for another reduction to later in the year.
Friday’s report confirms the labor market held up last year despite high borrowing costs, lingering inflation and political uncertainty. While demand for workers moderated and the unemployment rate rose in 2024, the economy still added 2.2 million jobs — below the 3 million increase in 2023 but above the 2 million created in 2019.
The Fed’s focus has returned firmly to inflation following an upturn in recent months, with several officials signaling they may hold rates steady for a while after lowering borrowing costs by a full percentage point in 2024. The BLS will publish monthly data on consumer prices on Jan. 15.
December’s advance in payrolls was led by health care and social assistance, retail trade and leisure and hospitality. Government payrolls also advanced. Manufacturing and wholesale trade posted declines.
The participation rate — the share of the population that is working or looking for work — was unchanged at 62.5%. The rate for workers of ages 25-54, also known as prime-age workers, was also unchanged.
The figures also showed fewer people permanently lost their jobs and more workers left positions voluntarily, while the median duration of unemployment ticked lower.
Wage gains
Central bankers are paying close attention to how labor supply and demand dynamics are impacting wage gains. Friday’s report showed average hourly earnings increased 3.9% from a year ago. Earnings for nonsupervisory employees, who make up the majority of workers, advanced 0.2% from November and 3.8% from a year earlier, marking the slowest annual pace since mid-2021.
The jobs report is comprised of two surveys — one of businesses and the other of households. The data incorporated annual revisions to the household survey, which is used to produce statistics like the unemployment and participation rates. Those revisions didn’t change the overall picture of the labor market. Benchmark revisions to the business survey are due next month.
Though data on weekly filings for unemployment insurance suggest layoffs remained subdued in 2024, several big-name companies including BlackRock Inc. and Tyson Foods Inc. have revealed plans to reduce headcount this year. In 2024, companies announced the fewest hires in almost a decade, according to a report from executive-coaching firm Challenger, Gray & Christmas.
It also remains to be seen how President-elect Donald Trump’s economic agenda — particularly plans for mass deportations and punitive tariffs on imported goods — will impact the labor market.