In December, the U.S. job market demonstrated unexpected strength, adding 256,000 jobs, surpassing the anticipated 155,000 jobs. This rise in employment is a testament to the economy’s robustness despite elevated interest rates, as reported by the Labor Department on January 10.
November’s job addition was revised to 212,000 from an initial 155,000 forecast, showing a consistent upward trend in employment growth. Over the year 2024, the total job growth amounted to 2.2 million, though this number marks a decrease from previous years, with 3 million jobs added in 2023, 4.5 million in 2022, and a record 6.4 million in 2021 as the economy recovered from pandemic-induced layoffs.
Despite some downward revisions for October and November totaling 8,000 jobs, December’s gains were led by increases in healthcare and government employment. Average hourly wages in December rose by 0.3% from the previous month and by 3.9% over the past year, slightly below the expectations of economists.
The resilience of the job market comes in the context of significant monetary tightening by the Federal Reserve, which raised interest rates 11 times over 2022 and 2023 in response to high inflation, which reached a peak of 9.1% in June 2022 but eased to 2.7% by November 2024. These measures have helped temper inflation without derailing economic growth or employment, which has seen substantial gains. Indeed, U.S. GDP has expanded at an annual pace of 3% or more in four of the last five quarters.
Further demonstrating economic stability, layoffs have remained below pre-pandemic levels, with unemployment claims hitting a near one-year low at 211,000 as of January 9. Although the Federal Reserve has adopted a more cautious approach toward rate cuts in 2025, with only two reductions projected compared to the previously expected four, the overall economic outlook remains positive. This environment supports wage growth aligned with the Fed’s inflation targets, facilitated by strong U.S. productivity that allows businesses to increase wages without significant price hikes.