Solid December jobs report expected to cap a strong year for labor market

Nation’s Top Economists Are Short-Term Happy, Long-Term Glum

The US economy appears to be enjoying the soft landing many argued was nearly impossible

Why 2024’s vibes are so perplexing: ‘Everybody thinks they’re losing’

Is 2024 a good year to buy a home?

Listen 6 min Share Comment on this story Comment Add to your saved stories Save

Employers added 216,000 jobs to their payrolls in December, capping a year of exceptional gains for American workers despite substantial cooling in the labor market. The unemployment rate held at 3.7 percent, according to the Bureau of Labor Statistics. Get a curated selection of 10 of our best stories in your inbox every weekend. ArrowRight Overall, the labor market added 2.7 million jobs in 2023, with an average monthly gain of 225,000 jobs. That’s a smaller annual gain than 2022 or 2021, but more than each of the four years leading up to the pandemic.

The unemployment rate has now remained below 4 percent for 25 months, a stretch last accomplished in the 1960s. Average hourly wage growth accelerated slightly in December continuing to outpace inflation, boosting workers’ spending power, especially among the lowest earners.

“In many ways the labor market is at its best place it has been, not only since [before covid], but by some measures in decades,” said Diane Swonk, chief economist at accounting giant KPMG.

Advertisement

Unexpectedly strong labor market gains throughout 2023 offered a big political win for the Biden administration, which also weathered much criticism about rising prices throughout the economy.

Jared Bernstein, chair of the White House Council of Economic Advisers, said on a call with reporters Friday morning that December’s job gains were “a strong number for this stage of a jobs recovery.”

“The president has long underscored the benefits of persistently tight labor markets,” Bernstein said. “Such conditions empower workers who might otherwise might be left behind.”

Major stock indexes hesitated following the release of December’s jobs numbers, as the data added uncertainty to whether the labor market has cooled enough to nudge the Federal Reserve to cut interest rates in the spring.

Employment in service-based sectors, including government, health care and social assistance, as well as construction, continued to buoy the labor market in December. Government added 52,000 jobs, mostly at the local and federal level and in education, as the sector has finally been able to catch up with the private hiring and attract new workers with improved wages.

Advertisement

Health care added 38,000 jobs, reflecting both a backlog of demand from pandemic-era lockdowns as well as an increased need for care among the aging baby-boomer population. And employment in social assistance rose by 21,000, mostly in services for individuals and families, such as therapists and social workers.

Meanwhile, transportation and warehousing lost 23,000 jobs, overwhelmingly in delivery roles, as the industry continues to contract from its rapid growth during the pandemic.

Share this article Share

“There’s been a long drawn out correction from the buildup of e-commerce sector,” said Andrew Flowers, a labor economist at Appcast, a digital job recruitment firm. “This world of ‘I’m going to buy a pingpong table online and order Grubhub’ that was so prevalent has really been unwinding.”

Sectors more sensitive to interest rates, such as information, financial activities, professional and business services and manufacturing, continued to see little to no job growth, as has been the trend in 2023 as the Fed pushed rates up.

Advertisement

Average hourly wage growth accelerated slightly in December, rising by 4.1 percent over the previous 12 months to $34.27 an hour. That’s one percentage point above inflation, which was at 3.1 percent in November, a divergence that should boost consumer spending in the new year.

But there are some warning signs in Friday’s report that could complicate the Fed’s plan to cut interest rates in 2024. Policymakers are looking for wage growth to continue but at a more moderated pace to avoid a new spike in inflation. The share of Americans participating in the labor market had been rising for most of 2023, but it dropped to 62.5 percent in December, which could become a problem if it turns into a trend. Central bank policymakers hope to grow the nation’s pool of workers to ease labor market tightness.

“This report probably keeps a March [interest rate] cut in play but it’s something that will be fiercely debated and a very close call and it will depend on how inflation data evolves,” said Stephen Juneau, an economist at Bank of America.

Advertisement

Over the past year, the labor market’s surprising resilience, driven by stronger-than-expected consumer spending, has helped more vulnerable workers, including Black workers, women, and people who did not go to college. The Black unemployment rate hit an all-time low in the spring at 4.7 percent. The labor force participation rate for women ages 25 to 54 reached a record high.

These gains were accomplished even as job creation softened substantially in 2023 from the labor market’s peak coming out of covid-19 lockdowns.

That ongoing cooling is the result of fight inflation by raising the cost of borrowing. So far, those rate hikes appear to have successfully brought down inflation without triggering widespread job losses. And easing inflation has helped improve dour consumer sentiment in the United States, which rose to a five-month high in December, according to one survey.

Advertisement

Though the economy appears to have dodged a recession, which was widely predicted by Wall Street forecasters only a year ago, many economists expect more labor market cooling in 2024. Job openings fell to a low in November last reached in 2021, according to the Bureau of Labor Statistics. The hiring rate has also fallen substantially, now below its 2019 pre-pandemic levels.

“The labor market is still tight in that labor demand exceeds labor supply, but it’s cooling in the sense that that gap is narrowing,” said Flowers, the economist at Appcast.

But layoffs remain lower than pre-pandemic levels, with new unemployment claims falling to a two-month low last week, according to data released Thursday by the Labor Department. Joe Brusuelas, chief economist for the accounting firm RSM US, said that employers are “very carefully managing their workforces and are not willing to unload workers, even as the economy cools.”

Advertisement

Brusuelas said that the service-based industries that are driving job growth at the moment should be able to continue churning out jobs in the new year, keeping the labor market ticking along at a pace strong enough to avoid a sharp rise in unemployment.

But Swonk, the KPMG economist, cautioned that concentrated gains in job creation make the labor market “more susceptible to external shocks.”

And there are other risks for the economy headed into 2024, including the looming threat of a government shutdown, geopolitical turmoil abroad and economic growth that pushes the Federal Reserve to continue to raise interest rates.

Australia's tight rental market forces tenants to make tough choices

Jury Finds Realtors Conspired to Keep Commissions High

The Elusive Soft Landing Is Coming Into View

How the $1.8 Billion Real-Estate Commissions Lawsuit Came to Be

Consumer Spending Slowed in October

Goods Deflation Is Back. It Could Speed Inflation’s Return to 2%.

Underlying Inflation Could Complicate Prospect for Rate Cuts

Home Sales on Pace for Slowest Year Since Housing Bust

Turning Empty Offices into Apartments Is Getting Even Harder

For Much of the World, Inflation Will Be Normal in 2024—Finally

How Can Spending Be Up When People Feel Down?

Repairs or a Three-Day Ski Tour? For an Aspen Condo Buyer, It Was a No Brainer

Economy will slow but avoid recession in 2024, contends Congressional Budget Office

The Job Market Can Stay Strong Without Rekindling Inflation

A Real-Estate Juggernaut Ran Off the Rails in 2023

5 reasons to be optimistic about the 2024 economy

Job Gains Accelerate, Capping Year of Healthy Hiring

Nation’s Biggest Hospital Landlord Suffers New Losses

Blue collar workers won big in 2023, defying bleak predictions

U.S. employers add 216,000 jobs in a sign of continued economic strength

Federal government quietly erased over 400,000 jobs from employment reports last year

Slower Hiring Adds to Case for Soft Landing

Where the Job Market Is Heading in 2024

What to expect from today’s jobs report

Delta Throttles Back on Pilot Hiring

💪📈🌎 US Economy's Mixed Outlook

The US economy is currently experiencing a positive trend, but economists have concerns about the long-term outlook and there is uncertainty surrounding the future.

Who is reporting on this topic?

Perspectives

Timeline

All articles

💪📈🌎 US Economy's Mixed Outlook

The US economy is currently experiencing a positive trend, but economists have concerns about the long-term outlook and there is uncertainty surrounding the future.

Who is reporting on this topic?

The right is ignoring this topic

Perspectives

Timeline

All articles

How are topics ranked?

How Attention Works