Job growth soared in December, spurring one of the strongest labor markets in U.S. history.

CNN-

The US economy closed out 2024 with another month of massive job growth, with the creation of 256,000 jobs in December.

The unemployment rate rose from 4.2% to 4.1%, capping a year that marked a return to pre-pandemic norms, according to Bureau of Labor Statistics data released Friday.

While the final 2024 jobs report highlights how the U.S. labor market has turned a corner since the pandemic, there is much uncertainty about what 2025 could bring to the labor market's trajectory, in partly because of potential policy changes from President-elect Donald Trump. involving trade, immigration, taxes, and the federal workforce.

Including December's gains, which are subject to revision, the economy created about 2.2 million jobs in 2024, or an average of 186,000 jobs per month. That matches annual totals from 2017 to 2019, but marks a slowdown from the meteoric gains seen during the pandemic recovery in previous years.

The job market is strong and, in a global sense, there's really nothing better than that, Elizabeth Crofoot, senior economist at labor analytics firm Lightcast, told CNN. There is very robust job growth. We have a low unemployment rate and it has decreased over the last month. Layoffs are low. People are employed and spending, which continues to support the economy and job market.

The United States has now added jobs for 48 consecutive months, tying the second-longest period of employment expansion on record.

Friday's data also appears to cap a historic achievement for President Joe Biden: Barring revisions, he is the first U.S. president to oversee monthly job gains during his entire presidency, according to BLS records dating back to 1939.

There are, however, important caveats to note: President Barack Obama, who with Donald Trump helped oversee the largest job expansion ever (113 months), recorded no monthly net loss of jobs during his second term. Furthermore, business cycles perpetuate regardless of party, and the ups and downs of the job market are influenced by factors beyond a single president.

Economists expected a net gain of 153,000 jobs and the unemployment rate held at 4.2%, according to FactSet.

US stocks fell sharply after a better-than-expected report, with the Dow falling more than 600 points. The 10-year Treasury yield climbed to 4.7 as traders worried that robust data and a stronger economy could lead the Federal Reserve to pause its rate-cutting campaign.

The December jobs report was expected to provide a more direct look at the health and trajectory of the labor market after two distorted reports: October, which proved much weaker due to hurricanes and strikes; and November, which was much stronger, since it included the return of missing workers.

October employment gains were revised upward by 7,000 to 43,000; and November payroll gains were revised down by 15,000 to 212,000, according to Friday's report.

Still, the likely December has also been a bit confusing, economists say.

The ongoing hurricane-related recovery as well as seasonal movements (the retail sector added 43,400 jobs last month after a drop of 29,200 jobs in November) likely factored into December's gains more stronger than expected, said Robert Frick, business economist at Navy Federal Credit. Union.

Much of the reported numbers come from the hurricane recovery, and the hiring range remains narrow, Frick wrote in a commentary Friday. The usual suspects, health care and government, once again saw the biggest gains. Retail jobs have increased, but this is a seasonal phenomenon. However, a good report means that expansion will continue and consumers' purchasing power will increase.

The labor market has demonstrated resilience and stability after recovering from a unique pandemic and facing the dual pressures of rapidly rising prices and high interest rates. The unemployment rate remained low, employment participation increased (especially among women and prime-age workers), productivity increased, and wage gains exceeded inflation for 19 months.

Wages increased 3.9% on an annual basis in December, according to Friday's report. Wage gains have moderated considerably in recent years, but still remain above pre-pandemic levels, when they increased by around 3%.

The strong job market has helped fuel consumer spending, allowing the overall economy to remain strong (GDP is growing at a robust annualized rate of 3.1%), while inflation has risen. eased, perhaps paving the way for a rare soft landing of price stabilization. without recession.

However, the job market is not impenetrable. Job growth is slowing, hiring has fallen, the manufacturing sector is showing some weakness and people are staying unemployed longer, fueling fears of further weakening.

Job gains were also somewhat limited. The lion's share (about 75%) of job gains in 2024 occurred in health care, government (especially state and local hiring), and leisure and hospitality, three sectors which continued to catch up in the face of the pandemic.

Economists and other policymakers have sounded the alarm about how Trump's promises, such as high tariffs, mass deportations and plans to shrink the size of government, could cause a reacceleration of inflation and an increase in the cost of living; worsening job shortages in sectors such as agriculture, health care, restaurants, child care and construction; and hinder agencies that provide services to the general public.

One negative risk to job growth is potential immigration restrictions imposed by the new Trump administration, which would limit the number of available workers, wrote Gus Faucher, chief economist at PNC Financial Services Group , in a note Friday.

The Fed, anxious to ensure maximum jobs and curb inflation, has reduced its interest rates by a full point in recent months. The pace of cuts is expected to slow in 2025, however, the Fed said, highlighting potential risks to inflation as well as the underlying strength of the labor market.

Given Friday's employment gains, a reduction in January is unlikely, said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.

The U.S. labor market ended 2024 on strong footing, with strong job growth, falling unemployment and resilient wage pressures, Rosner wrote in a statement. Today's strong December jobs report puts an end to lingering chances of a [quarter-point] in January and shifts the focus to the March meeting, where further rate cuts will depend on progress on inflation.

Inflation has slowed significantly after peaking in the summer of 2022; however, prices continue to exceed the Fed's 2% target (the central bank's preferred gauge was up 2.4% through November).

Progress on inflation has stalled somewhat in recent months as key contributors, notably related to housing, remain elevated. Still, Fed officials expect inflation to continue to slow slowly; However, this progress could depend heavily on actions taken by the new administration, economists say.

I think that's really where the focus is: how trade, tax and immigration policies will impact inflation and the federal government's decisions for 2025, Lightcasts Crofoot said. With so much political uncertainty, a healthy job market, and fairly robust job growth, the smartest thing to do in terms of interest rates is simply to wait for the data and see what changes will be future policies before reacting in one way or another.

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