December 2024 Employment Report: | Wilnesh News

Employment growth in December was much stronger than expected, which may lead to less incentive for the Federal Reserve to cut interest rates this year.

Nonfarm payrolls surged by 256,000 this month, up from 212,000 in November and above the Dow Jones consensus forecast of 155,000. Bureau of Labor Statistics reported on Friday.

The unemployment rate edged down to 4.1%, one-tenth of a point lower than expected. Another measure that includes discouraged workers and those working part-time for financial reasons dropped to 7.5%, down 0.2 percentage points and the lowest level since June 2024.

After the report, stock futures tumbled and U.S. Treasury yields soared as traders viewed the likelihood of the Fed cutting interest rates this year as low.

The report caps a year in which employment has grown each month, albeit inconsistently, sometimes raising questions about whether a recession is imminent. However, the past two months have shown that the labor market is still operating strongly as the Federal Reserve considers its next steps in monetary policy.

One area that Fed officials have emphasized not to become a source of inflation is the labor market, where wage growth has been slightly slower than expected.

Average hourly earnings rose 0.3% this month, in line with expectations, but the 12-month gain of 3.9% was slightly lower than expected, suggesting wage inflation is at least no longer a factor. The average working week was once again stable at 34.3 hours.

Job growth came from familiar sources such as health care (+46,000 jobs), leisure and hospitality (43,000 jobs), and government (33,000 jobs).

Retail also saw big gains, rising 43,000 points after falling 29,000 points during the November holiday shopping season. The industry’s annual salary increase was 2.2 million, a decrease of nearly one-third from 3 million in 2023.

Corrections in previous months have been less dramatic than recent trends. The number in October rose by 7,000 to 43,000, while the number in November was 15,000 lower than the previous estimate.

At its December meeting, Federal Reserve officials concluded that the labor market, although slowing, was overall healthy. The Fed voted to cut its key borrowing rate by a quarter of a percentage point at the meeting, while signaling that future rate cuts would be slower.

Markets expect the Fed to leave the policy unchanged at its meeting later this month, with futures pricing after the jobs report shifting to expectations of just one rate cut this year. Central bank officials have recently expressed concern about the pace of inflation, which has been running above the Fed’s 2% target, mainly because of high housing costs and some commodity prices.

The household report, which the U.S. Bureau of Labor Statistics uses to calculate the unemployment rate, showed a stronger employment outlook. That number rose by 478,000 people this month, bringing the labor force to 243,000, with the proportion of working-age people either employed or looking for work holding steady at 62.5%.

Full-time employment increased by 87,000, and part-time workers surged by 247,000. The number of unemployed people decreased by 235,000.

The duration of unemployment rose slightly to 23.7 weeks, the highest level since April 2022.

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