The United States added a startling 256,000 jobs in December, and the unemployment rate decreased slightly to 4.1%, meaning that President Joe Biden will leave office with a rather strong labor market.
Both numbers, which were released by the Bureau of Labor Statistics on Friday, exceeded Wall Street projections and compare favorably to historical averages. The Dow Jones survey of analysts predicted that the unemployment rate would stay at 4.2% in December and that only 155,000 new jobs would be created.
When taken separately, the most recent data show that the U.S. economy has mostly succeeded in achieving the “soft landing” scenario that Biden desired: comparatively low inflation and unemployment.
Although hiring has significantly slowed over the previous year, layoffs are still very low at the moment. Additionally, the majority of newly created jobs are focused in the government, retail, and health care sectors, with other industries stagnating. The BLS reported little employment increases in manufacturing, professional and business services, leisure and hospitality, and construction in December, continuing that pattern.
Manufacturers have reduced employment in four of the past five months and ended the year with a net loss of 87,000 payrolls, notwithstanding the rhetoric around the reshoring of blue-collar jobs.
The U.S. manufacturing sector employs 12.9 million people, which is nearly the same number as it was before the Covid epidemic.
As a result of Friday’s news, borrowing costs increased, and Wall Street traders now anticipate that the Fed will only lower interest rates once in 2025. The Dow erased gains following Donald Trump’s reelection, and stocks plummeted.
Frustrated with the Bidenera economy, especially with the consumer price increases that started to skyrocket shortly after he took office in 2021, millions of voters chose to put Trump back in the White House. Despite a significant decline, inflation continues to stubbornly linger slightly above the Federal Reserve’s 2% target.
A strong job market and significant salary increases that raised many households’ net spending power were eclipsed by those pricing pressures. As the economy recovered from the pandemic, hundreds of thousands of new jobs were created every month, and the unemployment rate fell to levels not seen in decades.
While the stock market rose to all-time highs and pay increases generally kept up with inflation, rising costs have left people psychologically worse off, which has helped Democrats lose the Senate and the White House.
Forecasters anticipate that hiring will continue to increase, albeit slowly, as long as economic activity maintains its steady pace and interest rates continue to decline following the Federal Reserve’s monetary easing.
Actually, the BLS said this week that there were a few more job opportunities. According to Julia Pollak, Chief Economist at ZipRecruiter, the data suggests that there may be better news to come, including the chance of higher hiring as 2025 gets underway.
According to Pollak, small business openings have been particularly increasing, which other studies indicate is primarily due to optimism about the state of the economy under Trump.
Following an extraordinary surge in consumer spending, consumer credit data released this week also indicates that American borrowers are looking to pay down their debt. While that would indicate a slowdown in spending, the same statistics revealed that borrowing for car purchases increased in November, pointing to a more balanced view of consumer health.
This week, S&P Global announced that the employment component of its business confidence services purchasing managers index increased for the first time in five months, bringing the index to an 18-month high.
According to Guy Berger, head of economic research at the Burning Glass Institute, a number of factors will come together to cause the labor market to stabilize and perhaps even warm up a little.