US Hiring Exceeds Expectations In December

US job growth surged unexpectedly in December, government data showed Friday, wrapping up a solid year for the labor market even as voters remain gloomy about the economy ahead of November's presidential election.

The world's biggest economy added 216,000 jobs in the final month of 2023 despite expectations of a slowdown from the prior month, according to Department of Labor data.

The unemployment rate was unchanged at 3.7 percent, holding at a historically low level and defying forecasts of a small uptick.

These robust figures come as higher interest rates bite, after the Federal Reserve lifted the benchmark lending rate rapidly and held it at a high level to ease demand and rein in inflation.

They also add to optimism that the United States is achieving a so-called soft landing where inflation comes down without major job losses and a significant downturn.

Wage growth was steady in December, rising 0.4 percent from November 2023, said the Labor Department.

Compared with the same period a year before, average hourly earnings rose by 4.1 percent, slightly above November's reading.

Among sectors where employment continued to trend up were government, health care, social assistance and construction. But transportation and warehousing lost jobs.

In 2023, although sectors such as manufacturing and housing were hit hard by higher interest rates, a resilient labor market helped support consumption and the broader economy.

Still strong

Job growth in November 2023 was revised down to 173,000, according to the latest report, and economist Ryan Sweet of Oxford Economics warned ahead of the release that "the jury is not going to be out on December employment for a couple more months."

"But overall, I think the trend is that the labor market is still very strong," he told AFP.

Friday's employment data is closely watched for its potential bearing on the Fed's thinking, as it mulls the future path of interest rates.

For now, "the timing of the first rate cut is still up in the air," Sweet noted.

Analysts add that the Fed will not be focused on a single report.

Beyond hiring numbers, EY chief economist Gregory Daco said policymakers are seeking a "balanced labor market." This means the demand and supply of labor are well-matched and pressures from wage growth are not excessive.

He noted that indicators like hours worked have shown a return towards pre-pandemic levels, while both the rates of hiring and quits are "the lowest since 2014 and 2018 if you exclude the pandemic."

"You are seeing a rebalancing, you are seeing weaker labor demand," he told AFP.

Looking ahead, he expects some reduced hiring and "strategic layoffs, but no broad-based retrenchment in the labor market."

"That should continue to sustain a healthy pace of income growth and in turn consumer spending," he said.

Source: AFP