The United States labour market closed 2024 on a strong note, with December job growth surpassing expectations and the unemployment rate falling to 4.1%.
The Labour Department reported a 256,000 increase in nonfarm payrolls, the largest monthly gain since March, beating expectations of 160,000 jobs added and bolstering views that the Federal Reserve would keep interest rates unchanged in its January meeting.
The report also highlighted a decline in the number of permanently unemployed individuals and a shortening of the median unemployment duration.
December’s job gains spanned a wide range of sectors. Healthcare employment rose by 46,000 positions, with increases across home healthcare services, nursing facilities, and hospitals. Retail employment rebounded with 43,000 new jobs, reversing a 29,000 decline in November, driven by hiring at clothing and general merchandise retailers.
Leisure and hospitality employment added 43,000 positions, including nearly 30,000 jobs in restaurants and bars. Professional and business services grew by 28,000 jobs, while government employment increased by 33,000.
Despite overall strength, the manufacturing sector shed 13,000 jobs, mainly in semiconductor and electronic component production. The mining and logging industries also reported losses.
The stronger-than-expected results follow the Federal Reserve’s concerns of persistent inflationary pressures tied to President-elect Donald Trump’s proposed economic policies, reflected in the minutes of the Fed’s 17-18 December meeting.
Financial markets widely expect the Federal Reserve to keep its benchmark overnight interest rate steady in the 4.25%-4.50% range during its upcoming policy meeting on 28-29 January, according to data from the CME FedWatch Tool.
In its December projections, the Fed revised its outlook for 2025, indicating only two quarter-point rate cuts, down from four forecasted in September. The adjustment reflects the U.S. economy’s resilience and persistent inflationary pressures. Over the preceding two years, the central bank raised its policy rate by 5.25 percentage points to combat inflation.
The financial markets reacted sharply to the Fed's cautious stance, as stocks on Wall Street declined over 1% apiece.
The U.S. dollar strengthened, while yields on longer-term U.S. Treasury securities surged to their highest levels since November 2023, signalling expectations of sustained elevated interest rates.