The U.S. labor market ended 2024 with a performance that exceeded expectations. Nonfarm payrolls rose by 256,000 in December, far exceeding the revised 212,000 figure in the previous month and the Dow Jones consensus estimate of 155,000, according to a report released Friday by the U.S. Bureau of Labor Statistics. The strong growth raises questions about the Federal Reserve's possible plans to cut interest rates this year.
Unemployment rate fell to 4.1% in December
The unemployment rate edged down to 4.1% in December, slightly below economists' expectations of 4.2%. The decline underscores the continued resilience of the labor market, even as doubts remain about the broader economic outlook and the risk of a possible recession.
Stock market futures decline, Treasury yields rise
After the report was released, stock market futures turned downward, reflecting market concerns about the Fed's future policy direction. Meanwhile, Treasury yields surged, indicating that investors are increasingly speculating that the Fed may maintain a more aggressive interest rate policy to balance economic growth and inflation control.
A year of steady growth in uncertainty
The growth in December marks the end of 2024, a year characterized by stable but sometimes uneven job growth. Throughout the year, monthly employment growth data fluctuated, occasionally raising concerns about an impending economic recession. However, the robust performance of the labor market in November and December highlights its ongoing resilience, as the Federal Reserve considers its next steps in monetary policy.
The labor market's impact on inflation weakens
Although the labor market remains a core area of concern for the Federal Reserve, officials noted that its impact on inflation is not significant. Supporting this view is the wage growth in December, which was below expectations. Average hourly wages grew by 0.3% that month, in line with forecasts, but the year-on-year increase was 3.9%, lower than expected. This slowdown in wage growth may alleviate market concerns about labor-driven inflationary pressures.
Impact on the Federal Reserve
The December employment report is a double-edged sword for the Federal Reserve. On one hand, strong job growth indicates ongoing economic resilience, potentially reducing the urgency for rate cuts; on the other hand, the slowdown in wage inflation provides some relief in the broader context of inflation control. The Fed's decisions in responding to these complex dynamics will have profound implications for the market and economy in 2025.
This article on December's job growth surge or limits on the Fed's rate cut plans first appeared in Chain News ABMedia.