The US economy experienced a significant employment boost in December, adding more jobs than previously expected. According to data released by the Bureau of Labor Statistics, total nonfarm payrolls rose by an impressive 256,000 last month. This figure exceeded the consensus estimate which forecasted an increase of 165,000, based on a survey compiled by Bloomberg.
It is important to note that revisions for November showed a decreased gain of 15,000 jobs, now reported at 212,000, while October's figures were adjusted upward by 7,000. In a notable shift, the unemployment rate dipped to 4.1%, down from November’s 4.2%, aligning with market expectations for December. Scott Anderson, the chief US economist at BMO, highlighted that the December employment surge marked the largest monthly increase in nonfarm payrolls since March.
In his analysis, he emphasized, 'This was a robust employment report that reinforces the resilience of the US labor market and expansion and will keep the Federal Reserve on hold in January as they try to bring inflation pressures down.' The Federal Open Market Committee (FOMC) members have expressed that upward risks to inflation expectations have grown, influenced by strong price growth data and potential shifts in trade and immigration policies, as revealed in the minutes from their December policy meeting. Last month, the Federal Reserve reduced its benchmark lending rate by 25 basis points, signaling fewer cuts ahead than previously anticipated in September.
The market’s consensus is leaning towards the Fed maintaining its policy rate in the upcoming meetings, as indicated by the CME FedWatch tool. On the private payrolls front, an increase of 223,000 jobs was noted in December, an improvement from the 182,000 jobs added in the prior month, easily surpassing the Bloomberg consensus forecast of 140,000.
The service sector was particularly robust, contributing 231,000 new positions, while there was a slight contraction in the goods-producing sector, which lost 8,000 jobs. Wage growth also stayed in line with expectations, with average hourly earnings rising by 0.3% compared to the previous month, and an annual increase of 3.9%, just shy of the 4% predicted by analysts.
Anderson remarked, 'The solid nonfarm payroll gain and decent earnings growth will keep the US economic expansion on a sturdy foundation to start the year and that will likely keep the FOMC on the sidelines at the January meeting.'.