The US labor market ended 2024 on a high note, adding 256,000 jobs in December, above the forecast of 164,000.
Unemployment unexpectedly dropped from 4.2% in November to 4.1% in December. The consensus expectation was that the rate would hold steady.
"We are very proud of our ability to leave with such a strong labor market," Acting Secretary of Labor Julie Su told BI. "People have come into the labor market and are looking for jobs — and they're finding them."
Cory Stahle, an economist at the Indeed Hiring Lab, said there were some concerns in the job market at the start of 2024, but the data indicated signs of equilibrium in the second half.
"In the first half of 2024, we saw unemployment start rising, and it was a pretty good cause for concern," Stahle said. "But then in the back half of the year, we've seen that the unemployment rate has really stabilized."
Labor force participation remained at 62.5% in December. The employment-population ratio increased from 59.8% in November to 60% in December.
Wage growth cooled slightly. Average hourly earnings increased to $35.69 in December, a 3.9% increase from a year earlier. Earnings rose by 4.0% in October and November.
Many sectors saw job growth, especially in healthcare. However, manufacturing, mining and logging, and utilities lost jobs in December.
The new jobs report likely won't derail the Federal Reserve's widely expected pause in its interest-rate easing campaign at its coming meeting after three rate cuts in a row.
CME FedWatch, which shows what traders think will happen to interest rates based on market activity, indicated after the jobs report a 97% chance that rates wouldn't be changed in the first scheduled Federal Open Market Committee meeting of 2025 on January 28 and 29, up from around 93% before the jobs report. There are eight scheduled FOMC meetings in 2025, but the Committee's members signaled in December that the Fed plans only two cuts this year.
In a press conference after the December meeting — where the Fed cut rates by 25 basis points — Fed chair Jerome Powell said that "the labor market is now looser than pre-pandemic" and is gradually still cooling down. He added further cooling isn't needed to reach the Fed's 2% inflation target.
"We're starting to see evidence that the Fed's 100 basis points of cuts are translating into real improvements, improvements in the real economy," Julia Pollak, chief economist at ZipRecruiter, said. "While the labor market often lags behind quite substantially, it seems like perhaps the labor market rebound is starting to take hold."
Economists predict the job market in 2025 will be challenging for job searchers, and employers might be cautious in their hiring plans during the start of the year.
"While business sentiment has picked up somewhat since the election, there is still a lot of uncertainty about future policy changes that will likely make businesses hesitant to ramp up hiring, particularly in the first half of 2025," Dante DeAntonio, a labor economist with Moody's Analytics, said in a written statement in 2024.
The new data could provide a little more optimism. Stahle said even if the labor market is cooler than in recent years, "we're really going into the year with a decent amount of momentum."
