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The US economy added jobs faster than expected in December, as Federal Reserve policymakers are keeping tight tabs on the strength of the labor market ahead of their meeting later this month.
The Labor Department on Friday reported that employers added 256,000 jobs in December, well above the LSEG economists’ estimate.
The unemployment rate reached 4.1%, slightly lower than economists’ expectations.
The number of jobs added in the previous two months were both revised up, with October job creation revised up by 7,000 from an increase of 36,000 to 43,000; while November was revised down by 15,000 from a gain of 227,000 to 212,000. Taken together, these two months saw 8,000 fewer jobs created than previously reported.
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Private sector payrolls added 223,000 jobs in December, well above the 135,000 estimated by LSEG economists.
The manufacturing sector saw employment decline by 13,000 in December, an unexpected drop when economists had forecast an increase of 5,000 jobs.
Wage growth was largely in line with expectations, with average earnings up 0.3% on a monthly basis and 3.9% from a year ago.
Health care added 46,000 jobs in December with gains concentrated in home health care services (+15,000), nursing and residential care facilities (+14,000) and hospitals (+12,000). Health care added an average of 57,000 jobs per month in 2024, the same as the monthly average in 2023.
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The retail sector added 43,000 in December after losing 29,000 jobs in November. Last month’s gains were concentrated in apparel, footwear and jewelry retailers (+23,000), general merchandise (+13,000) and health and personal care (+7,000). Retail jobs lost in building materials and garden equipment (-11,000).
The government added 33,000 jobs in December, slightly below the monthly average for 2024 of 37,000 jobs per month. Last year saw slower government job growth than in 2023, when the average monthly gain was 59,000 jobs.
Employment in social assistance increased by 23,000 last month, most of which was in individual and family services (+17,000). The sector added an average of 18,000 jobs per month in 2024, slightly lower than the average of 23,000 in 2023.
The labor force participation rate was unchanged at 62.5%, unchanged from a month ago and remaining in a narrow range of 62.5% to 62.7% since December 2023.
The number of people considered long-term unemployed, defined as being out of work for 27 weeks or more, was little changed in December at 1.6 million, but rose by 278,000 from a year earlier. The long-term unemployed accounted for 22.4% of all unemployed last month.
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The December jobs report comes as the Federal Reserve will hold its next meeting in late January to discuss a possible rate cut. Fed Chairman Jerome Powell signaled after the most recent 25-basis-point cut in December that policymakers could slow the pace of rate changes based on labor market and inflation data.
“The surprisingly strong jobs report certainly won’t make the Fed any less hawkish,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “All eyes will turn to next week’s inflation data, but even a negative surprise in these numbers probably won’t be enough to get the Fed to cut rates anytime soon.”
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Market expectations that the Fed will hold rates steady at the January meeting were bolstered by the December jobs report. The probability that the Fed will keep its benchmark federal funds target in a range of 4.25% to 4.5% rose to 97.3% on Friday, from 93.6% a day earlier.
This is a developing story. Please check back for updates.
