With the addition of 256,000 jobs in December and a slight decline in the unemployment rate to 4.1%, President Joe Biden will leave office with a comparatively strong labor market.
When compared to historical averages, both of those numbers are favorable. Analysts polled by Dow Jones predicted that the unemployment rate would have stayed at 4.2% and that 155,000 new jobs would be created during the month, down from a revised 212,000 in November.
The most recent statistics alone indicate that the U.S. economy has essentially reached the “soft landing” scenario that Biden had hoped for: comparatively low inflation and unemployment.
Even though hiring has slowed, layoffs are still quite low today.
The economic circumstances that prevailed for significant portions of Biden’s term have been deemed undesirable by many Americans, particularly the inflation rate that started to rise shortly after he took office in 2021 and is still higher than the Federal Reserve’s 2% target.
As the U.S. economy roared back to life after the conclusion of the Covid-19 pandemic lockdowns, the pace of price increases disguised a flourishing labor market that saw the unemployment rate plummet to lows not seen in decades, with hundreds of thousands of jobs added most months.
Democrats’ attempts to hold onto power in the White House and Senate were severely hampered by the fact that, on average, wage increases kept up with inflation, and even as the stock market hit new highs, consumers were left feeling psychologically worse off.
Overall, though, analysts predict that hiring will start to increase once more, if slowly, as the economy continues to grow steadily and interest rates continue to decline following Federal Reserve easing.
Indeed, this week’s report from the Bureau of Labor Statistics showed a little increase in job opportunities. According to Julia Pollak, chief economist at ZipRecruiter, this suggests that there may be better news coming, including the prospect of increased hiring as 2025 approaches.
According to Pollak, small business openings have been particularly increasing, which other studies indicate is primarily due to confidence about the state of the economy after President-elect Donald Trump assumes office.
This week’s consumer credit data also reveals that following a sharp increase in spending, American borrowers are looking to reduce their debt loads. Although that could imply a slowdown in spending, the same information revealed that borrowing for car purchases increased in November, pointing to a more balanced view of consumer health.
The short-term outlook is dismal for anyone seeking for work right now, according to Guy Berger, head of economic research at the Burning Glass Institute, which focuses on the future of labor.
However, Berger stated in a recent note that given surveys indicating U.S. enterprises are growing more enthusiastic about raising headcounts in 2025, further labor market cooling should begin to turn in the upcoming months.
For example, S&P Global said this week 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 Berger, a number of factors will come together to cause the job market to stabilize and perhaps even warm up a bit.