December Jobs Report: Labor Market Grew Faster Than Expected As Unemployment Clocks In At 4.1%

10 Jan 2025 by Derek Saul · Forbes

Topline

Job growth was stronger than economists anticipated last month, according to the Labor Department’s monthly nonfarm payrolls report released Friday morning, a key datapoint as investors and policymakers reassess the state of the economy ahead of the shift in power in the nation’s capital.

Friday is the first major economic report of the new year.Getty Images

Key Facts

The U.S. added an estimated 256,000 jobs in December, smashing consensus economist estimates of a seasonally adjusted 153,000, according to FactSet.

The unemployment rate was 4.1% last month, compared to forecasts of 4.2%, where it stood in November.

Average hourly wages increased by 0.3% to $35.69, marking the 45th straight month of record pay for workers, though the 3.9% annual wages bump is a far cry from the more than 4.5% growth enjoyed by workers across Sept. 2021 through Sept. 2023 as record job switching fueled significant wage increases.

The government also said it revised its prior estimates for October job growth upward by 7,000 and for November job growth downward by 15,000.

Key Background

Friday’s nonfarm payrolls is the “first big report of the year” for the U.S. economy, according to Sevens Report founder Tom Essaye, noting the jobs update is “even more important than it would normally be” given the fork in the road for U.S. monetary policy. That’s because the sharp interest rate cuts long yearned for by borrowers and equity investors may be drying up – the Federal Reserve recently indicated it expects far fewer rate cuts in 2025 than previously forecasted – due to a combination of economic factors. Those include a relatively stable labor market, making the need for stimulatory cuts less pressing, and concerns about sticky inflation partially traced back to President-Elect Donald Trump’s proposed tariffs and broader economic gameplan. Conventional economics wisdom says higher interest rates lead to higher unemployment and lower inflation. “The cutting cycle might already be over” if the labor market proves resilient in coming months, cautioned Bank of America strategist Gonzalo Asis in a Monday note to clients.

Surprising Fact

Though 2024 was a solid year for job growth – nonfarm payrolls grew by more than 1% from 157.3 million to more than 159 million from Dec. 2023 to Dec. 2024 – U.S. companies announced the second-most job cuts since 2009 last year, trailing only 2020, according to Challenger, Gray & Christmas. High-profile corporations like BlackRock and Microsoft indicated this month they’ll perform small rounds of layoffs.

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