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The US economy added jobs faster than expected in December as Federal Reserve policymakers took a hard look at the strength of the labor market ahead of their meeting later this month.
On Friday the Labor Department reported that employers added 256,000 jobs in December, more than the LSEG economists estimate.
The unemployment rate came in at 4.1%, slightly lower than economists had expected.
The number of jobs added in the previous two months was revised up, with October job creation revised up by 7,000 from a gain of 36,000 to 43,000; while November was revised down by 15,000 from a gain of 227,000 to 212,000. Combined, those two months created 8,000 fewer jobs than previously reported.
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Private sector payrolls added 223,000 jobs in December, well above the 135,000 estimated by LSEG economists.
Wage growth was largely in line with expectations, with earnings up 0.3% month-on-month and 3.9% from a year ago.
The manufacturing sector saw employment fall by 13,000 in December, a dramatic drop when economists projected a gain of 5,000 jobs.
Health care added 46,000 jobs in December with gains focused on home health care services (+15,000), nursing and assisted living facilities (+14,000) and hospitals (+12,000). Health care added an average of 57,000 jobs per month in 2024, the same as the monthly average in 2023.
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The manufacturing sector lost 13,000 jobs in December. (time, CEO Alexei Mordashov said on Thursday. REUTERS/Rebecca Cook/Reuters Photos)
The retail sector added 43,000 jobs in December after losing 29,000 jobs in November. Last month’s gains were concentrated in clothing, footwear and jewelry stores (+23,000), general merchandise (+13,000) and health and personal care (+7,000). Sales of lost jobs in construction materials and garden equipment (-11,000).
The government added 33,000 jobs in December, slightly below the 2024 monthly average of 37,000 jobs. Last year there was less growth in government jobs than in 2023, when the average monthly gain was 59,000 jobs.
Social assistance hiring increased by 23,000 last month, most of them in individual and family services (+17,000). The sector added an average of 18,000 jobs per month in 2024, which is slightly lower than the average of 23,000 in 2023.
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The labor force participation rate was unchanged at 62.5%, unchanged from last month, and remains in the narrow range of 62.5% to 62.7% as of December 2023.
The number of people classified as long-term unemployed, defined as 27 weeks or more out of work, was little changed in December at 1.6 million but increased by 278,000 compared to the previous year. The long-term unemployed accounted for 22.4% of all unemployed people last month.
Fed chairman Jerome Powell has signaled that the Fed may slow the pace of interest rate changes in response to labor market conditions and inflation data. (Seth Herald/Bloomberg via Getty Images/Getty Images)
The December jobs report comes as the Federal Reserve will hold its next meeting in late January to discuss possible rate cuts. Fed Chairman Jerome Powell signaled after the most recent 25 basis point cut in December that policymakers may slow the pace of rate changes based on labor market earnings and inflation data.
“A surprisingly strong jobs report won’t make the Fed hawkish,” said Ellen Zentner, chief economist at Morgan Stanley Wealth Management. “All eyes will now turn to next week’s inflation data, but even a modest surprise in those numbers probably won’t be enough to get the Fed to cut rates anytime soon.”
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Market expectations that the Fed will hold rates steady at its January meeting were bolstered by the December jobs report. The probability that the Fed will keep its federal funds rate target at 4.25% to 4.5% rose to 97.3% on Friday, from 93.6% the previous day.
This is a developing story. Please check back for updates.
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