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The Key Takeaways
- Employers in the United States likely created 153,000 jobs during December. That’s close to average for the past six months. At the same time, unemployment rates likely stayed at the relatively low level of 4.2%.
- Since the boom that followed pandemic, job growth has been slowing but stable.
- The trajectory of the job market over the next year is uncertain and could depend on incoming president Donald Trump's policy decisions.
- Financial market participants will be watching the jobs numbers closely amid concerns that a stronger-than-expected reading could keep the Federal Reserve from cutting interest rates again.
Continue the recent trend and you can expect that U.S. jobs will continue to grow steadily in 2024.
The Bureau of Labor Statistics is due to release its report on Friday, and it will probably show that 155,000 U.S. jobs were added in December. This was based on a Dow Jones Newswires/The Wall Street Journal survey of economists. It would mean that fewer jobs were added than in December (227,000) and slightly more jobs have been added each month on average over the past six. The unemployment rate is expected to remain relatively stable at 4.2%.
ADP’s survey, released on Wednesday, shows that the private sector added 122,000 positions in December. The median prediction was 136,000. ADP can provide a preview of the official data from government, but economists do not trust it.
This is slower than in earlier years after the pandemic, when the demand for workers was much greater and the COVID-19 economic recession had been overcome. High borrowing costs for loans—a result of the Federal Reserve’s campaign of interest rate hikes meant to curb inflation since 2022—have discouraged borrowing and spending and thrown some sand in the gears of the job market.
What's Ahead for the Job Market?
Some economists believe the employment market will bounce back by 2025. Others predict an ongoing slowdown.
Economic predictions always come with a grain of salt, and perhaps more so this year, given the uncertainties about the policies of the second Trump administration. Job market outcomes could be affected by Trump’s ability to implement tariffs for foreign trade and impose tax reductions for corporations, amongst other significant policy changes that he pledged on his campaign trail.
In the short term, however, economists believe that workers can expect a stable job market. Employers are not hiring in large numbers, but neither are they laying off employees in mass.
“Employers, scarred by the post-pandemic labor shortage and aware that the days of ample labor supply are likely over, tell me they don’t want to get caught short workers again,” Thomas Barkin said this in an address on Friday. “As a result, while cautious employers are allowing headcount to drift downward through attrition and reduced hiring, they are slow to reduce staff. The layoff rate remains near historic lows. A low hiring, low firing labor market is still a healthy one.”
High-anticipated data for investors
Financial market participants will be watching the jobs numbers closely amid concerns that a stronger-than-expected reading could keep the Fed from cutting interest rates again.
In recent weeks, several indicators have shown the economy to be surprisingly resilient and thrown cold water on hopes in financial markets that the Fed will continue cutting its influential federal funds rate, as it has done at its last three policy meetings since September.
Uncertainty about future interest rates was heightened by the data released earlier in the week, showing there were more available jobs than anticipated on November’s labour market. Stocks tumbled and the yield on 10-year Treasurys hit its highest level since April.
As of Wednesday, financial markets were pricing in a nearly a one-in-three chance that the Fed won't cut interest rates in the first half of this year, up from the 11% likelihood seen a month ago, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.
To combat inflation, the Fed kept its interest rates at their highest level in two decades during the entire year prior to September. Since then, the central bank’s policy committee has cut the rate by an entire percentage point over the course of three meetings. The committee members cautioned, however, that if inflation continues to rise, the rate of easing will likely slow.
Update, Jan. 9, 2025: Updated with recent Federal Reserve rate decision and information regarding the financial market importance of these data.
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