Washington (AP) Another indication of the economy’s tenacity in the face of high interest rates is the surprising 256,000 new jobs that employers added in the United States in December.
The Labor Department said Friday that job growth increased by 212,000 last month compared to November.
The economy created 2.2 million new jobs in 2024, which is a respectable amount but less than the 3 million jobs created in 2023, the 4.5 million jobs created in 2022, and the record 6.4 million jobs created in 2021 as the economy recovered from severe pandemic layoffs.
The July figures exceeded economists’ expectations of 4.2% unemployment and about 155,000 new jobs. 46,000 new positions were added by healthcare enterprises, 43,000 by merchants, and 33,000 by federal, state, and local government organizations. However, 13,000 jobs were slashed by manufacturers.
8,000 positions were cut from the October and November payrolls due to Labor Department changes.
The average hourly wage increased 3.9% from the previous year and 0.3% from November. The pay increase from year to year was little lower than what experts had predicted.
Expectations that the Federal Reserve would be less inclined to lower interest rates as a result of the positive jobs data caused stocks to drop Friday morning. The economy doesn’t appear to require assistance. According to Brian Coulton, senior economist at Fitch Ratings, it is highly likely that the rate-cutting pace of the Fed will now slow down.
Over the past few months, it has been difficult to get a comprehensive picture of the American labor market.
The October jobs figures were thrown off by hurricanes and a major Boeing strike, which caused them to decline. This was followed by a strong bounce in November, which probably overstated the hiring strength.
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Although seasonal changes around the holidays may have impacted the December results, Thomas Simons, chief U.S. economist at Jefferies, stated that it is difficult to say anything unfavorable about the specifics of this data.
The employment market and the economy have proven surprisingly resilient in recent years. The Fed increased its benchmark interest rate, the fed funds rate, 11 times in 2022 and 2023 to the highest level in almost 20 years in response to inflation that reached a four-decade high two and a half years ago.
Despite widespread expectations, the increasing borrowing costs did not trigger a recession. The economy continued to grow, businesses continued to hire, and consumers continued to spend. In fact, in four of the last five quarters, the U.S. gross domestic product—the country’s output of goods and services—has grown at a strong annual pace of 3% or more.
Unusual employment security is enjoyed by American workers. The rate of layoffs is lower than it was before the outbreak. Just 211,000 people claimed for unemployment benefits last week, the fewest in almost a year, according to a Labor Department report released on Thursday.
From a peak of 9.1% in June 2022 to 2.7% in November, inflation has also decreased. The Fed was confident enough to lower interest rates three times in the final four months of 2024 due to the decline in year-over-year price rises.
At their meeting in December, however, Fed policymakers gave a hint that they would be more cautious about rate reduction this year. In September, they projected four rate decreases for 2025; now, they only expect two. Recent months have seen a halt in the fight against inflation, which is still above the Fed’s 2% target.
Written by Paul Wiseman, AP Economics