Jobs Report December 2024:

Job growth was much stronger than expected in December, which likely gave the Federal Reserve less incentive to cut interest rates this year.

Nonfarm payrolls jumped 256,000 for the month, up from 212,000 in November and above the 155,000 forecast by the Dow Jones consensus, the Bureau of Labor Statistics reported Friday.

The unemployment rate fell slightly to 4.1%, a tenth of a point below expectations. An alternative measure that includes discouraged workers and those in part-time positions for economic reasons fell to 7.5%, a drop of 0.2 percentage points and the lowest since June 2024.

Stocks plunged after the report was released, while Treasury yields climbed as traders anticipated a lower chance of a Fed rate cut this year.

“This is a hot report,” said Dan North, senior North America economist at Allianz Trade. “We must think that [Fed Chair] Jerome Powell breathes a sigh of relief that his job just got a little easier. Inflation hasn't moved anywhere in months, so there's no incentive to cut rates. Now you understand that [jobs report] so you don't need to cut rates to stimulate the economy. »

The report caps a year in which employment grew every month, although inconsistently and at times raising questions about the possibility of a recession. However, the past two months have shown that the labor market is still operating in good health as the Fed considers its next monetary policy moves.

One area that Fed officials have highlighted as not being a source of inflation is the labor market, and wages have risen slightly less than expected.

Average hourly wages rose 0.3% for the month, which was in line with forecasts, but the 12-month gain of 3.9% was slightly below the outlook and indicates that wage inflation, at least, becomes less of a factor. The average work week again remained stable at 34.3 hours.

“You'll never hear me complain about the fact that we created 250,000 jobs,” Chicago Fed President Austan Goolsbee said on CNBC's “Squawk on the Street.” “I think this is a good employment report. It reassures me even more that the labor market is stabilizing at a level close to full employment.”

Job growth came from the usual sources of health care (up 46,000), leisure and hospitality (43,000) and government (33,000).

Retail also saw a sizable gain, up 43,000 after losing 29,000 in November heading into the holiday shopping season. The sector saw payroll increase by 2.2 million for the whole year, down sharply from 2023's 3 million gains.

Revisions in previous months have been less substantial than the recent trend. The October count saw an increase of 7,000 to 43,000, while the November count was reduced by 15,000 from the previous estimate.

At their December meeting, Fed officials judged the labor market to be healthy overall, although slowing. The Fed voted at the meeting to cut its benchmark rate by a quarter of a percentage point, while indicating a slower pace of cuts to come.

Markets expect the Fed to hold firm at the meeting later this month, with futures prices after the jobs report swinging toward the expectation of just one cut this year. The market implied probability of a single cut increased to 68.5% after the jobs report was released, according to CME Group's FedWatch indicator.

Goolsbee said he still expects rate reductions this year as long as the data flow remains consistent.

“The surprisingly good jobs report is certainly not going to make the Fed less hawkish,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “All eyes will now be on next week's inflation data, but even a downward surprise in these numbers likely won't be enough to prompt the Fed to cut rates in the near future.”

Central bankers have recently expressed concerns about the pace of inflation, which has held above the Fed's 2% target, largely because of stubbornly high housing costs as well as prices of certain goods.

The household report, used by the BLS to calculate the unemployment rate, presents an even more positive picture of employment. This number increased by 478,000 during the month, while the labor force increased by 243,000 and the share of working-age people employed or looking for work remained stable at 62.5%.

Full-time employment increased by 87,000, while that of part-time workers jumped by 247,000. The number of unemployed fell by 235,000.

The duration of unemployment increased slightly to 23.7 weeks, the highest level since April 2022. However, the number of people out of work for 27 weeks or more fell to 1.55 million, down 103,000.

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