Employers stuck to the landing in 2024, ending the year with a surge in hiring after a summer slowdown and a disrupted fall.
The economy added a seasonally adjusted 256,000 jobs in December, the Labor Department reported Friday. After two years of slowdown in the labor market, the figure significantly exceeded expectations and the unemployment rate fell slightly to 4.1 percent, which is very good by historical standards.
The strong result – undimmed by the labor strikes and destructive storms of the past few months – could signal new strength after months of restraint among both workers and companies. The average hourly wage rose by 0.3 percent compared to November or 3.9 percent compared to the previous year and was therefore well above inflation.
“This jobs report really exceeds all expectations,” said Scott Anderson, chief U.S. economist at BMO Capital Markets. “It kind of wipes out the summer payroll slump that we saw from June through August before the big Fed rate cut in September.”
However, the apparent turnaround in employment growth dampens the chances of further rate cuts in the coming months. Investors are already expecting Federal Reserve officials to remain calm at their meeting at the end of January. For policymakers, robust growth means further easing could boost prices and hamper progress on inflation.
“The Fed is saying, 'We think this is a good labor market, we want it to stay that way, we don't want it to cool any further,'” said Guy Berger, director of economic research at the Burning Glass Institute. “What they didn't say is: 'We want to stimulate the job market again.'”
The strong employment data caused the stock markets to collapse. Bond yields rose to even higher heights, signaling expectations that interest rates would remain high for longer.
For now, the numbers are good news for workers, even if the number of job vacancies has returned to normal after a rapid increase following the pandemic. The December report also rounds out President Biden's impressive record of adding an average of 355,000 new jobs per month over the course of his term. (This number will likely be revised downward slightly when the updated data is integrated next month.)
“This report caps a remarkable run in our tenure,” Jared Bernstein, chairman of the Council of Economic Advisers, said in an email. “For this president, returning to and maintaining full employment has been a North Star.”
This completes the picture of one of the best economies in modern history welcoming a new president: Consumers continue to spend confidently even as inflation has eased, and layoffs are unusually low.
Some of President-elect Donald J. Trump's stated goals — like raising tariffs and curbing immigration — could slow hiring in the coming years. But companies have expressed optimism that the reintroduction of tax cuts and looser regulation will lead in the opposite direction.
“The key question for the new administration is: 'How do you make sure you don't downgrade this in any way?'” said Philipp Carlsson-Szlezak, chief economist at Boston Consulting Group. “That’s a great legacy to start a semester with.”
The details of the report were also encouraging. The fall in the unemployment rate was due to more people finding work, not a fall in the number of people looking for work. A broader measure of unemployment that includes part-time workers who would rather work full-time as well as those only marginally connected to the labor force appears to have stopped rising after peaking at 7.8 percent last summer.
Job growth continues to come primarily from the services sector, with healthcare, social assistance, leisure and hospitality accounting for most of the increases. New jobs continued to be created at all levels of government, despite concerns that the depletion of pandemic-era stimulus funds could leave gaps in state and local budgets.
After a largely stagnant year, the retail sector recorded an increase of 43,000 jobs. Temporary employment services added jobs in the past two months after a long and steep decline, a possible sign that employers are hiring temporary workers to meet rising demand.
Karin Kimbrough, chief economist at professional networking and job search site LinkedIn, believes the about-face may be due to the impatience of employers, who have focused on dealing with inflation over the past two years and their hiring frenzy from the time of the digesting the pandemic.
“You cannot remain in a state of caution,” said Dr. Kimbrough. “At some point they're going to have to show up and say, 'We're going to make investments,' and hopefully that will lead to a more dynamic labor market in the future.”
That's how Tristan Hamberg felt after 11 years of running a painting company in and around Portland, Oregon. Since the pandemic, he has struggled with both hiring difficulties — wages for painters rose by about 40 percent — and rising material prices. Portland experienced a decline in population, causing its residential customer base to shrink, while the number of commercial customers declined sharply.
“The job market was so uncertain yet competitive,” Mr. Hamberg said of that time.
These days he believes his fortunes could change and he has a solid team of four full-time employees and four part-time employees. That brightened mood — coupled with a jump in sentiment measured by the National Federation of Independent Business last month — is partly due to the idea that Mr. Trump could create a more favorable environment for small businesses.
“We are very optimistic heading into 2025 and feel we have a good budget and a comprehensive annual plan for profitability and sustainable growth,” Mr Hamberg said.
Adding to this feeling of reassurance for employers, small business customers surveyed by payroll company Gusto said they expect wage growth to slow in the coming year, allowing them to more comfortably manage their expenses.
But falling wage growth also has a downside. People who haven't looked for work before are less likely to start if it's not worth it. One possible sign of this is that the proportion of people between the ages of 25 and 54 who were either working or looking for work fell to 83.4 percent, now half a point lower than the 83.9 percent at the beginning of last year reached.
At the same time, for those who are unemployed, returning to work — or just getting their foot in the door — can be a daunting experience. Since few people are leaving their jobs for better opportunities, not many positions have become available and the average duration of unemployment has increased since the summer.
Recruiters are an indicator of turning points in the labor market. Since the employees responsible for expanding the number of employees have apparently not yet significantly improved their prospects.
Christian Carver, a 31-year-old recruiter in central North Carolina, has been looking for work since November, when she and her entire team were laid off from Advance Auto Parts. It happened at an inopportune time: she was pregnant with her fourth child, due this spring. Being in the office five days a week is now impossible, but employers haven't been offering as many virtual positions lately.
“Remote was as easy to find as it was two years ago, and now everyone wants you to work hybrid or in the office,” Ms. Carver said. “I am praying for a miracle at this point and am grateful for the time I had looking for a job for my family.”