U.S. hiring picked up unexpectedly in December as employers added a strong 256,000 jobs, another sign of the economy’s resilience in the face of high interest rates.
Job growth rose 212,000 last month from November, the Labor Department reported Friday.
For all of 2024, the economy added 2.2 million jobs, a solid number but down from 3 million in 2023, 4.5 million in 2022 and a record 6.4 million in 2021 as the economy bounded back from massive pandemic layoffs.
The monthly numbers beat forecasters’ expectations of around 155,000 new jobs and 4.2% unemployment. Health care companies added 46,000 jobs, retailers 43,000 and government agencies at the federal, state and local 33,000. But manufacturers cut 13,000 jobs.
Labor Department revisions shaved 8,000 jobs from October and November payrolls.
Average hourly wages rose 0.3% from November and 3.9% from a year earlier. The year-over-year wage gain was slightly less than economists had forecast.
Stocks fell Friday morning on the expectations that the strong jobs report will make the Federal Reserve less likely to cut interest rates. The economy doesn’t seem to need help. “It seems pretty certain that the pace of Fed rate cuts is now going to slow down,” said Brian Coulton, chief economist at Fitch Ratings.
Getting a clear view of the U.S. job market hasn’t been easy over the past few months.
Hurricanes and a big strike at Boeing threw off the October jobs numbers, pushing them down and setting up a payback rebound in November that likely exaggerated the strength of hiring.
Thomas Simons, chief U.S. economist at Jefferies, said that seasonal adjustments around the holidays may have affected the December numbers, but he added that nonetheless “it is hard to say anything negative about the details of this report.”
Over the past few years, the economy and the job market have shown surprising resilience. Responding to inflation that hit a four-decade high two and a half years ago, the Fed raised its benchmark interest rate — the fed funds rate — 11 times in 2022 and 2023, taking it to the highest level in more than two decades.
The higher borrowing costs were widely expected to cause a recession but didn’t. Companies kept hiring, consumers kept spending, and the economy kept rolling along. In fact, U.S. gross domestic product — the nation’s output of goods and services — has expanded at a robust annual pace of 3% or more in four of the last five quarters.
Layoffs are running below the pre-pandemic trend. On Thursday, the Labor Department reported that 211,000 people applied for unemployment benefits last week, the fewest in nearly a year.
Inflation has come down, too, from a peak of 9.1% in June 2022 to 2.7% in November. The drop in year-over-year price increases gave the Fed enough confidence to cut rates three times in the last four months of 2024.
But Fed officials signaled at their December meeting that they planned to be more cautious about rate cuts this year. They now project just two rate reductions in 2025, down from the four they envisioned back in September. Progress against inflation has stalled in recent months, and it remains stuck above the Fed’s 2% target.
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