Jobs report today: U.S. added booming 256,000 jobs in December, unemployment at 4.1%
Paul Davidson, USA TODAY
Updated 5 min read
U.S. employers added a booming 256,000 jobs in December, shrugging off high labor costs, slowing sales and uncertainty about President-elect Donald Trump’s economic policies.
The unemployment rate fell from 4.2% to 4.1%, the Labor Department said Friday.
Economists surveyed by Bloomberg had estimated that about 165,000 jobs were added last month, based on their median forecast.
The robust performance bolsters the case for the Federal Reserve to stand pat and skip an interest rate cut at a meeting later this month.
Employers added 2.2 million jobs for all of 2024, or an average 186,000 a month. That's down from 3 million, or an average 251,000 a month, in 2023 but still a surprisingly strong showing. Most forecasters expected a sharper slowdown, believing inflation and high interest would take a bigger toll and a post-pandemic rebound in economic activity would fade more dramatically.
A "now hiring" sign in Somerville, Massachusetts.
Did wages increase in 2024?
Average hourly pay rose 10 cents to $35.69, nudging down the yearly increase from 4% to 3.9%.
Wage growth generally has slowed as pandemic-related labor shortages have eased, helping bring down inflation. Since employers often pass their increased labor costs to consumers through higher prices, economists have said yearly wage growth needs to fall to 3.5% to reach the Fed’s 2% inflation goal.
But recent strong gains in productivity – or output per worker – could let companies give up to 4% raises without hiking prices, economists have said.
Will the Fed cut rates again?
The strong jobs report likely keeps the Fed on course to pause its campaign of interest rate cuts at a meeting later this month.
After the Fed lowered rates by a total percentage point at its last three meetings of 2024 amid easing inflation, many economists expected the central bank to pause in January and slow the pace of decreases this year. That’s because price increases have remained elevated recently while the economy and labor market have been healthy.
The Fed raises rates or keeps them high to increase borrowing costs and bring down inflation. It lowers rates to spur a weakening economy or return rates to normal as inflation slows.
Economist Michael Reid of RBC Capital Markets said it would take “a surprisingly weak employment report” for December to convince Fed officials to cut rates again this month. Instead, Friday’s report was unexpectedly strong.
"The odds have increased that the Fed is close to being finished with its (rate cuts), particularly if the incoming Trump administration pushes ahead" with new tariffs and immigration restraints that are likely to push prices higher, economist Thomas Ryan of Capital Economics wrote in a note to clients.
In 2022 and 2023, the Fed hiked its key interest rate to a 23-year high of 5.25% to 5.5% to fight a pandemic-induced inflation spike.
Which industries are adding the most jobs?
Health care led the job gains with 46,000. Retail added 43,000, bouncing back from disappointing holiday hires in November. The public sector added 33,000 jobs; leisure and hospitality, which includes restaurants and bars, 43,000; and professional and business services, 28,000.
For months, hiring has been concentrated in health care, government and leisure and hospitality, signaling underlying weakness in the broader private-sector job market. December's sturdy gains in retail and professional services show job growth widening to a healthier mix of industries, said Julia Pollak, chief economist of ZipRecruiter, a job search site.
"That increase reflects improved employer confidence amid business strength and an improving consumer outlook," Pollak wrote in a note to clients.
How is the job market right now?
December ostensibly marked a return to a more stable labor market after Southeast hurricanes and worker strikes hammered employment totals in October, leading to higher-than-normal payroll gains the following month.
But some additional recovery from the storms may have continued to bolster job growth last month in industries such as construction and leisure and hospitality, economist Nancy Vanden Houten of Oxford Economics wrote in a note to clients.
Retail was another wild card. Holiday hiring was relatively weak this past fall, in part, because of consumers’ shift to online shopping, resulting in job losses for retailers after Labor seasonally adjusted the figures. That development also may have suppressed December payrolls in sectors such as retail, trucking and warehousing, Vanden Houten said.
At the same time, the late Thanksgiving probably contributed to November’s soft holiday hiring and so a larger share of new seasonal workers likely were counted in last month’s jobs survey, Goldman Sachs wrote in a research note. That helped boost the December employment totals.
Will the job market get better in 2025?
More broadly, job growth is expected to slow this year. Consumers’ post-pandemic burst of demand is fading, but businesses are still saddled with high labor costs due to outsize raises during COVID-19-related labor shortages. That’s squeezing profit margins.
Uncertainty over Trump’s policies is causing many employers to stand pat for now. His vows to impose hefty tariffs on certain imports and deport millions of immigrants who lack permanent legal status could reignite inflation, dampen consumption and constrain the labor force, said economist Dante DeAntonio of Moody’s Analytics.
Yet his pledge to loosen regulations on companies and work with Congress to extend and expand tax cuts could embolden firms to step up hiring and investment. Many businesses are waiting to see how the policies play out before moving ahead with hiring plans, DeAntonio said.
Although hiring has hovered below pre-pandemic levels for months, net job gains have remained sturdy because businesses have been reluctant to lay off workers in large numbers while consumer spending growth, though slowing, is still solid.
But by the end of the year, the immigration crackdown – along with baby boomer retirements - is expected to constrict the supply of workers and push up wages and prices while tariffs also drive inflation higher. Tax cuts, meanwhile, aren’t expected to juice the economy until 2026. Moody’s predicts average monthly job growth will slow to 100,000 by the end of 2025.
(This story has been updated to add graphics and additional information.)
