December 2024 witnessed a notable boost in job creation in the U.S., with 256,000 new positions filled, outpacing November‘s adjusted figure of 212,000. This surge pushed the unemployment rate down to 4.1%, underscoring a resilient labor market just before the upcoming inauguration of President-elect Donald Trump.
For the whole of 2024, the U.S. economy added 2.2 million jobs. Although this is a healthy number, it falls short of the 3 million jobs in 2023 and 4.5 million in 2022. The peak year was 2021, with a remarkable 6.4 million jobs as the nation rebounded from pandemic-related disruptions.
Sector Performance and Wage Growth
The healthcare and government sectors spearheaded December‘s job gains. Meanwhile, average hourly wages saw a 0.3% increase from the previous month and a 3.9% rise year-over-year. These figures, although slightly below expectations, signal steady wage growth. December‘s data provides a more accurate view of the labor market, following fluctuations caused by external events like hurricanes and major strikes in prior months.
The U.S. economy has shown unexpected strength, expanding at an annual rate of 3% or more in four of the past five quarters. Despite the Federal Reserve‘s aggressive interest rate hikes in 2022 and 2023 to curb inflation, the feared recession has not occurred. Companies are still hiring, and consumer spending remains steady, illustrating the economy’s adaptability.
Market: Inflation Trends and Federal Reserve Policy
Inflation has decreased to 2.7% as of November, allowing the Fed to cut interest rates three times towards the end of 2024. Nevertheless, the Fed is approaching 2025 with caution, projecting only two rate reductions for the year, as inflation continues to hover above their 2% target.
Current wage growth appears sustainable and consistent with the Fed‘s inflation objectives. Strong productivity gains have enabled businesses to offer higher wages without significantly raising prices. According to Nancy Vanden Houten from Oxford Economics, the current pace of wage growth is unlikely to fuel inflation, easing concerns for the Fed.
The robust job market and steady economic expansion signal a positive trajectory as the U.S. prepares for new political leadership.
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