The US economy rounded out 2024 in tremendous fashion as the number of jobs increased by 256,000 in December, way more than the 165,000 analysts were calling for. The strong showing supported sentiment that the jobs market is proving resilient while other signs pointed to a cooling economy. The unemployment rate ticked down to 4.1% from November’s 4.2% level, rounding out the year quite nicely.
Job growth by industry
The December jobs report signals a broad-based pickup in employment across a range of sectors, led by healthcare and government. In the health care sector alone, that contributed 46,000, while the government increased by 33,000. Other sectors, like retail, also showed strong gains, adding 43,000 in the month. This is an example of a really strong labor market holding up very well to the changing economic environment.
Those were good numbers, however, even as overall 2024 job creation came in at 2.2 million, lower than the 3 million added in 2023. That reflects a general deceleration in the rate of hiring as businesses grapple with the continuing economic uncertainty and high interest rates that have typified much of the past year.
Economic indicators and inflation
The other big consideration would be the course of wage growth that will decide the course of the economy in the session. Average hourly earnings rose 0.3% in December, matching expectations after a 0.4% increase in November. Wages rose by 3.9% year over year, somewhat less than the November mark of 4%. Wage developments carry important implications for direct implications on inflationary pressures and consumer purchasing power.
These are some of the indicators being keenly watched by the Federal Reserve, ahead of their next meetings on interest rates. Recent job growth could make their job a little harder because more labor market strength means less of a case for further easing of monetary policy.
Layoffs and job openings
Still, with the very strong job additions, there are indications that the labor market may be cooling off a bit. Layoffs are still low but have picked up slightly, and hiring in many sectors has dropped somewhat, possibly reflecting business caution related to the overall economic outlook. The number of job openings edged up to 8.1 million at the end of November from 7.84 million reported for October, the Job Openings and Labor Turnover Survey, or JOLTS, revealed, which is the highest level since May 2023.
The hiring rate, on the other hand, slipped to 3.3%, with a steep drop over the previous months. That is most likely an indication that while there are open job positions, firms are still rather cautious about forcefully adding to the workforce.
Economic outlook for 2025
Economists sound guardedly optimistic on the outlook for the labor market as 2025 draws closer. Many now expect the opposite extreme: with increased economic activity, more stable at that, hirings are most likely to trend upward, helped by declining interest rates from, say, more dovish than expected actions on the Federal Reserve’s part; new policies may be instituted under the current administration to give job seekers a leg up on growth prospects in the marketplace.
Business leaders have been optimistic about hiring in the coming months, according to surveys, despite challenges such as high borrowing costs and inflationary pressures; expected policy changes under the new administration may also contribute to that sentiment.
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