US employers hired more than expected in December, wage growth remains solid

US Nonfarm payrolls increased by 216,000 jobs in December, surpassing expectations, while November figure was revised lower to show payrolls rising 173,000 instead of the initially reported 199,000. Economists had expected an increase of 170,000 jobs.

The unemployment rate remained unchanged at 3.7%. There has been an influx of people into the labor force, partly due to a rise in immigration. The unemployment rate has increased from a five-decade low of 3.4% in April.

The economy added 2.7 million jobs in 2023, a significant step-down from the 4.8 million positions created in 2022. This reflects cooling demand for labor and in the broader economy, influenced by the Federal Reserve’s rate hikes.

The data suggests that the economy avoided a recession in the previous year and is likely to continue growing through 2024, supported by the resilience of the labor market, which in turn supports consumer spending.

Wage inflation remains firm, with average hourly earnings rising by 0.4% in December, following a 0.4% gain in the prior month. The year-on-year increase in wages reached 4.1%, up from 4.0% in November.

While the data indicates a strong labor market, some economists express skepticism, suggesting that the labor market might not be as robust as the numbers suggest.

Most economists do not anticipate a recession in the current year but expect slow growth.

The Federal Reserve held its policy rate steady within the 5.25%-5.50% range last month. Policymakers signaled in new economic projections that the historical monetary policy tightening over the past two years has concluded, and they anticipate lower borrowing costs in 2024.