The U.S. labor market finished 2023 robustly, with 216,000 jobs added in December, surpassing expectations. The unemployment rate held steady at 3.7%. The hiring boost came from a gain of 52,000 in government jobs and 38,000 in health care-related fields. Average hourly earnings rose 0.4%, exceeding estimates at 0.3%, and were up 4.1% from a year ago, surpassing the expected 3.9%. The report revealed a decline in job holders of 683,000, leading to a rise in the “real” unemployment rate to 7.1%. The labor force participation rate dropped to 62.5%, its lowest since February. In 2023, job gains totaled 2.7 million.

Despite the positive job market, the ISM services gauge posted a lower-than-expected reading of 50.6, impacting market averages. Treasury yields rose, especially in longer durations. The report highlighted gains in government, health care, leisure, hospitality, social assistance, and construction, while transportation and warehousing saw a loss of 23,000 jobs. Inflationary pressures persisted as average hourly earnings rose 0.4% on the month and 4.1% from a year ago. Fed funds futures markets lowered the odds of a March rate cut to 56%, according to the CME Group.

The report challenges the narrative of a substantially easier Fed, with job growth remaining resilient. Markets expect up to six rate cuts, but the Fed’s projections indicate three quarter-percentage point cuts this year. Economic growth has held solid, with GDP on track to increase at a 2.5% annualized pace in the fourth quarter. Despite 11 interest rate hikes since March 2022, the most aggressive in 40 years, the U.S. economy continues to defy expectations. Consumers have remained resilient, with holiday spending likely reaching a record $222.1 billion, a 5% increase.

Summary

The U.S. labor market showed strength, challenging expectations of a slowdown. Despite inflation-fighting efforts and market expectations, the Fed may not follow a substantially easier path, considering the resilient job market and solid economic growth. The report paints a picture of ongoing strength in the U.S. economy, impacting both monetary policy expectations and market sentiment.

FAQs

How many jobs were added in the U.S. in December 2023?

In December 2023, the U.S. added 216,000 jobs, surpassing expectations.

What was the unemployment rate in December 2023?

The unemployment rate in December 2023 held steady at 3.7%.

What sectors contributed to the hiring boost in December?

Government jobs saw a gain of 52,000, health care added 38,000, and various sectors like leisure, hospitality, social assistance, and construction also contributed to the hiring boost.