The December jobs report from the U.S. Bureau of Labor Statistics revealed that employment grew more than expected despite an ongoing cooldown.
Payrolls rose by 216,000 jobs in December, the largest gain in three months. The increase shattered expectations, with a Reuters poll of economists predicting a gain of 170,000 jobs. Government, health care, social assistance and construction were among the sectors that saw employment growth.
Average hourly earnings were up by 0.4%, flat from November and also surpassing consensus expectations, which called for a 0.3% uptick. On an annualized basis, earnings climbed 4.3% in the fourth quarter of 2023, compared to 4.1% over the whole year, suggesting that wage growth deceleration has abated somewhat.
The strong showing indicated that the economy, despite ongoing uncertainty and predictions of a forthcoming recession, continues to chug along, backed by labor market resilience. But the report also amended figures for October and November, downwardly revising combined additions for the two months by 71,000. And the average of 165,000 jobs added in the fourth quarter is down from roughly 200,000 in the summer, illustrating a clear slowdown remains in place.
Also worth noting was that, while the unemployment rate held steady at 3.7% in December, the surge in the labor force from the prior month was starkly inverted. The labor force participation fell to 62.5%, a sizable 0.3% decrease that brought the figure to its lowest level in nearly a year.
The mixed bag paints the road ahead for the economy in an interesting light. For one thing, the hardiness of the labor market has thus far buoyed consumer spending, which has in turn given employers a relatively green light to add to payrolls. But the impacts of ongoing factors like inflation may push that balance off-kilter.
“The good news is that employers are still hiring, but that rate is beginning to show signs of slowing down,” said Selma Hepp, chief economist at CoreLogic. “Jobs in tourism and other service industry sectors are driving a large portion of the hiring numbers, which will remain positive until the US consumer begins to lower their household spending. Skipping dinner at restaurants is an easy way for families to tighten their belts, for example, so we are watching out for an economic slowdown once that begins to happen.”
