About 256,000 jobs were added to the U.S. economy in December – far better than expected – while the unemployment rate was flat compared with November at 4.1%, according to the U.S. Department of Labor.
The stellar jobs report reduces the likelihood of a January Fed rate cut.
Industries that added the most jobs included health care, government, and social assistance.
Retail trade also added jobs in December, following a loss in November.
The unemployment rate has been either 4.1% or 4.2% for the past 7 months, the BLS notes.
The number of unemployed people, at 6.9 million, also changed little in December compared with November.
The number of long-term unemployed (those jobless for 27 weeks or more) was also flat compared with November, at 1.6 million – however, it is up by about 278,000 from a year earlier.
The long-term unemployed accounted for 22.4% of all unemployed people.
The labor force participation rate was 62.5% and the employment-population ratio was 60.0% – both flat compared with the month prior.
Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3%, to $35.69.
Over the past 12 months, average hourly earnings have increased by 3.9%.
“The December Jobs report blew by expectations, capping a year of resilient, albeit slower, job growth,” says Sam Williamson, senior economist for First American, in a statement. “Today’s strong report empowers the Fed to take a more hawkish stance, providing cover for the expected pause in rate cuts at January’s FOMC meeting.”
“The January pause and a more gradual pace of rate cuts will allow the Fed to assess the impact of the 100-basis-point cuts made in late 2024 and gain clarity on the incoming administration’s fiscal policies and 119th Congress’ legislative priorities,” Williamson says.
“Overall, mortgage rates are expected to drift modestly lower to the mid-to-low 6 percent range by year-end, though unexpected labor market or economic downturns could push rates lower,” he adds.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), says the strong jobs report likely postpones any rate cut the Fed may have been planning for January.
“The job market is strong,” Yun says in a statement. “A net additional 256,000 workers were hired in December, bringing the total for the year to 2.2 million more jobs. The unemployment rate notched lower to 4.1 percent. The wage growth rate of 3.9 percent is outpacing inflation at 2.7 percent. All this positive news is, however, temporarily bad news for interest rates.”
“Good economic data do not have to be associated with higher interest rates,” Yun adds. “More production and higher productivity can bring down inflation and interest rates. However, higher rates now are due to lingering inflation, which has not been fully contained. The oversupply in the apartment sector implies that inflation will be much calmer in the future. But until then, mortgage rates will stick near the current elevated rates. In the meantime, consumers are looking for inventory, and more choices have led to gains in home sales in many markets.”
Photo: Blake Wheeler