US hiring exceeded expectations in December, with the world’s biggest economy adding 216,000 jobs despite predictions of a slowdown, according to government data released on Friday. The robust figures highlight the strength of the US labor market, with the unemployment rate remaining unchanged at 3.7 percent, a historically low level. The increase in hiring comes as higher interest rates take hold, following the Federal Reserve’s efforts to ease demand and rein in inflation. The data also fuel optimism for a so-called soft landing, as inflation comes down without significant job losses or a major economic downturn.
Wage growth was steady in December, rising 0.4 percent from the previous month, according to the Labor Department. Compared to the same period a year earlier, average hourly earnings saw a 4.1 percent increase, slightly above November’s figure.
While sectors such as manufacturing and housing have been hit hard by higher interest rates in 2023, a resilient labor market has helped support consumption and the broader economy. Sectors that experienced continued employment growth include government, health care, social assistance, and construction. However, jobs were lost in transportation and warehousing.
Economist Ryan Sweet of Oxford Economics emphasized that, despite a lower November job growth figure, the overall trend indicates a strong labor market. The timing of the first rate cut by the Federal Reserve remains uncertain, but analysts suggest that the central bank will not base its decision solely on these employment numbers. Policymakers aim for a balanced labor market where labor supply and demand are well-matched, and wage growth does not become excessive.
Looking ahead, EY chief economist Gregory Daco expects reduced hiring and strategic layoffs in certain areas, but no broad-based retrenchment in the labor market. Daco believes this will maintain a healthy pace of income growth, which, in turn, will drive consumer spending.
The positive employment data emphasizes the strength of the US labor market and reinforces investor and consumer confidence. As global markets closely watch the Federal Reserve’s actions, policymakers remain focused on maintaining a balanced labor market. With indicators showing a return towards pre-pandemic levels, the United States anticipates continued economic stability and sustainable growth in the coming months.
