Job Market Finished 2024 on a Strong Note

Employers stuck the landing in 2024, finishing the year with a bounce of hiring after a summer slowdown and an autumn marred by disruption.

The economy added 256,000 jobs in December, seasonally adjusted, the Labor Department reported on Friday. The number handily beat expectations after two years of cooling in the labor market, and the unemployment rate edged down to 4.1%, which is very healthy by historical standards.

The strong result - unclouded by the labor strikes and destructive storms of previous months - may signal renewed vigor after months of reserve among both workers and businesses. Average hourly earnings rose 0.3% from November, or 3.9% over the previous year, running well above inflation.

"This employment report really crushes all expectations," said Scott Anderson, chief U.S. economist at BMO Capital Markets. "It kind of wipes out the summer slump in payrolls we saw from June to August before the big Fed rate cut in September."

The apparent turnaround in employment growth, however, dampens chances of further interest rate cuts in the coming months. Investors already expect Federal Reserve officials to hold steady at their meeting in late January. For monetary policymakers, the robust growth means that additional easing could reignite prices and stymie progress on inflation.

"The Fed is like, ‘We think this is a good labor market, we want to keep it that way, we don't want it cooling further,'" said Guy Berger, director of economic research at the Burning Glass Institute. "What they haven't said is, ‘We want to heat the labor market back up.'"

The strong employment data sent stock markets tumbling. Bond yields rose to even loftier heights, signaling expectations that interest rates would remain high for longer.

For now, the numbers are good news for workers, even as job openings have fallen back to normal after soaring after the pandemic. December's report also rounds out an impressive record for President Joe Biden, who has presided over an average of 355,000 jobs per month added over the course of his term. (That number will probably be revised downward slightly when updated data is integrated next month.)

"This report caps off a remarkable run on our watch," Jared Bernstein, the chair of the Council of Economic Advisers, said in an email. "For this president, getting back to and staying at full employment was a north star."

It completes the picture of one of the best economies to greet an incoming president in modern history, with consumers continuing to spend confidently as inflation has eased, and layoffs at unusually low levels.

Some of President-elect Donald Trump's stated goals - like raising tariffs and clamping down on immigration - may slow hiring in the coming years. But businesses have expressed optimism that the restoration of tax cuts and looser regulation will cut in the opposite direction.

"For the new administration, the key question is, ‘How do you make sure you don't downgrade this in any way?'" said Philipp Carlsson-Szlezak, chief economist at the Boston Consulting Group. "This is a big inheritance to start a term with."

The report's details were encouraging as well. A decrease in the unemployment rate came from more people finding jobs, rather than a decline in the number of people looking for work. A broader measure of unemployment, which includes people working part time who would rather work full time, as well as those marginally attached to the labor force, appears to have stopped rising after topping out at 7.8% last summer.

Employment growth is still coming primarily from services, with health care, social assistance, leisure and hospitality powering most gains. All levels of government continued to add jobs, despite concerns that the exhaustion of pandemic-era stimulus funding might leave holes in state and local budgets.

Retail, after a mostly flat year, added 43,000 positions. Temporary help services have been adding jobs for the past two months after a long and precipitous slide, in a potential sign that employers are bringing on contingent labor to address surges in demand.

Karin Kimbrough, chief economist for the professional networking and job search site LinkedIn, thinks the turnaround may reflect impatience from employers who over the past two years have been focused on dealing with inflation and digesting their pandemic-era hiring binges.

"You cannot remain in a state of caution," Kimbrough said. "At some point they have to emerge and say, ‘we're going to make investments,' and that's hopefully going to result in a more dynamic labor market going forward."

Adding to that sense of security for employers: Small business clients surveyed by the payroll processing firm Gusto said they expected wage growth to slow in the coming year, allowing them to manage expenses more comfortably.

But there's a flip side to falling wage growth. People who haven't been looking for work are less likely to start doing so if it doesn't seem worthwhile. In a potential sign of that, the share of people between the ages of 25 and 54 who were either working or looking for work edged down to 83.4%, and is now half a point lower than the 83.9% it reached earlier last year.

At the same time, for those who've found themselves without a job, getting back to work - or just getting a foot in the door - can be a discouraging experience. With few people quitting their jobs for better opportunities, not many positions have been coming open, and the average length of unemployment has been rising since the summer.