WASHINGTON (AP) – U.S. job growth rose and unemployment fell last month, an unexpected show of strength that could be costly for homebuyers and businesses that have been counting on lower interest rates to cut the cost of buying everything from refrigerators to houses.
Employers added 256,000 jobs last month, up from 212,000 in November, the Labor Department reported on Friday.
Unemployment, which was expected to hover around 4.2%, fell to 4.1% last month. Health care companies added 46,000 jobs, retailers 43,000 and federal, state and local government agencies 33,000.
The final 2024 jobs report underscores that the economy and employment were able to grow at a solid pace even with interest rates much higher than they were before the pandemic. As a result, the Federal Reserve is much less likely to cut borrowing costs again in the coming months. The Fed cut its rate three times last year, partly out of concern that employment and growth were falling.
Overall, the solid jobs numbers suggest the economy is entering a post-COVID period of steady growth, higher interest rates, low unemployment and mildly elevated inflation.
“There is simply no need for additional Fed rate cuts anytime soon,” said Joe Brusuelas, chief economist at RSM, an accounting and tax advisory firm.
Brusuelas says the economy, fueled in part by higher productivity, could grow at a sustained rate faster than it has since the Great Recession 16 years ago. Low unemployment can encourage healthy consumer spending. However, higher demand could also push up inflation.
“The economy will grow at a much higher equilibrium level, which means higher inflation and higher interest rates compared to what we were used to from 2000 to 2020,” he said.
The US continued to add jobs steadily throughout 2024, totaling 2.2 million. That’s down from job growth of 3 million in 2023, 4.5 million in 2022 and a record 6.4 million in 2021 as the economy bounces back from the massive COVID-19 shutdown. But last year’s average of 186,000 new jobs per month still slightly exceeds the pre-pandemic average of 182,000 from 2016-2019, solid years for the economy.
US markets fell after the release of December jobs numbers, as investors felt the likelihood of further interest rate cuts had faded. But rates are still extremely high for Americans trying to buy a home, a car, or even a kitchen appliance. Mortgage rates have risen for four consecutive weeks to reach the highest level since July.
Average hourly wages rose 0.3% from November and 3.9% from a year ago. Year-over-year wage growth was slightly lower than economists had predicted.
Over the past few years, the strength of the US economy and labor market has surprised almost everyone. Responding to inflation that hit a four-decade high two and a half years ago, the Fed raised the key interest rate — the fed funds rate — 11 times in 2022 and 2023, pushing it to a record high in more than two decades.
A long-awaited recession never happened. Companies kept hiring, consumers kept spending, and the economy kept rolling. In fact, the US gross domestic product – the country’s production of goods and services – has expanded at a strong annual rate of 3% or more in four of the last five quarters.
Inflation has also fallen, from a peak of 9.1% in June 2022 to 2.7% in November. The decline in year-over-year price growth gave the Fed enough confidence to cut rates three times in the final four months of 2024.
But Fed officials signaled in December that they planned to be more cautious about reducing rates this year. They now forecast just two rate cuts in 2025, down from the four they forecast in September. Progress against inflation has stalled in recent months, and it remains stuck above the Fed’s 2% target.
“There is more to do to reduce costs, but we have taken actions to lower prescription drug prices, health insurance premiums, utility bills and gas prices that will pay dividends for years to come,” he said. Friday President Joe Biden. “This has been a hard-fought recovery, but we’ve made progress for working families, showing what can be achieved when we build from the bottom up.”
Biden is delivering a big deal solid economy his successor, President-elect Donald Trump, although many Americans have been hit hard by rising prices over the past three years and have generally been pessimistic about the economic outlook.
Many businesses are still struggling to find workers.
Optimistic for 2025, Matt Harding, head of concepts at Piada Italian Street Food, plans to open seven new stores and hire 250 more people this year. The fast-casual restaurant chain, based in Columbus, Ohio, now operates 58 stores in seven states and has 1,200 employees. Hourly pay has increased 35% to 40% since 2020, to a starting wage of up to $16.45 for typical workers, helping to reduce turnover.
UCHealth, a nonprofit that runs hospitals and clinics in Colorado, Wyoming and Nebraska, is struggling to find skilled clinical workers — nurses, physical therapists and occupational therapists, said Angela Spinelli, UCHealth’s senior director of talent acquisition.
“The market has not softened for these positions”, said Spinelli. UCHealth, which hired 9,400 people last year and currently has 1,200 openings, has raised pay and focused on “growing our own” — promoting within the company and providing training for employees to learn new skills to move from, say , a health aide in a nursing position.
However, job hunting can still be difficult in the current environment.
Mike Pincus was out of work for 20 months after the startup he worked for went out of business. Pincus, 55, had previously spent 35 years as a personal trainer and wanted to try something new. “I didn’t know exactly what I wanted to do,” he said. “But I knew what I didn’t want to do.”
The search turned out to be disappointing. Pincus said many employers seemed to use algorithms to weed out unconventional applicants.
“If a person actually looks at your resume, it’s a very quick look,” he said.
Visiting a friend at a bike shop, his “happy place,” Pincus applied for and got a job there. He has been a manager at Trek’s Ventura, California store since early December.
“I like it,” he said. “I didn’t know I would like it. I didn’t know I could do it.”
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AP writers Christopher Rugaber and Josh Boak in Washington and Anne D’Innocenzio in New York contributed to this story.
