One of the strongest labor markets in US history just ended 2024 with a bang

By Alicia Wallace, CNN

(CNN) — The US economy closed out 2024 with another month of massive job growth, adding 256,000 positions in December.

The unemployment rate dipped to 4.1% from 4.2%, wrapping up a year that marked a return to pre-pandemic norms, according to Bureau of Labor Statistics data released Friday.

While the final jobs report for 2024 underscores how the US labor market has turned the corner since the pandemic, there’s plenty of uncertainty as to what 2025 could bring for the trajectory of the labor market — in part because of President-elect Donald Trump’s potential policy changes involving trade, immigration, taxes and the federal workforce.

Including December’s gains, which are subject to revision, the economy added about 2.2 million jobs in 2024, an average of 186,000 jobs per month. That’s in line with annual totals from 2017 to 2019 but marks a slowdown from the blowout gains seen during the pandemic recovery during the prior years.

The US has now added jobs for 48 months in a row, tying the second-longest period of employment expansion on record.

Economists were expecting a net gain of 153,000 jobs and for the unemployment rate to stay at 4.2%, according to FactSet.

US stock futures dropped sharply after the better-than-expected report, with futures on the Dow falling by almost 400 points before settling slightly higher. The 10-year Treasury yield surged to 4.7% as traders fear the robust data and a stronger economy could lead the Federal Reserve to pause its rate-cutting campaign.

Strong gains but seasonal, weather factors at play

The December jobs report was expected to provide a more straightforward look at the health and trajectory of the labor market following two distorted reports: October, which came in much weaker due to hurricanes and labor strikes; and November, which came in much stronger, since it included the return of those missing workers.

Still, it’s likely December was muddied up as well, economists said.

The ongoing hurricane-related recovery as well as seasonal moves (the retail industry added 43,400 jobs last month following a downswing of 29,200 jobs in November) likely factored into December’s stronger-than-anticipated gains, said Robert Frick, corporate economist at Navy Federal Credit Union.

“A big chunk of the headline number is from post-hurricane recovery, and the range of hiring remains narrow,” Frick wrote in commentary Friday. “The usual suspects — health care and government — again accounted for the biggest gains. Retail jobs swelled, but that’s a seasonal phenomenon. Still, a good report means the expansion will continue and consumer purchasing power is rising.”

The labor market has shown resilience and stability after recovering from a once-in-a-generation pandemic and navigating the dual pressures of fast-rising prices and high interest rates. The unemployment rate has remained low, employment participation has increased (especially among women and prime-aged workers), productivity has increased and wage gains have outpaced inflation for 19 months.

The solid labor market has helped fuel consumer spending, which in turn has kept the overall economy strong as inflation has eased — perhaps setting the stage for the rare achievement of a “soft landing” of price stabilization without a recession.

Still, the jobs market isn’t impenetrable. Job growth is slowing, hiring has dropped off, and people are staying unemployed for longer, fueling concerns that a greater weakening could be afoot.

What this means for the Fed

The Fed, with an eye to ensuring maximum employment in addition to cooler inflation, has cut interest rates by a full point in recent months. The pace of cuts, however, is expected to moderate in 2025, the Fed has indicated, noting potential risks to inflation as well as underlying strength in the labor market.

Considering Friday’s employment gains, a cut in January isn’t likely, said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.

“The US labor market ended 2024 on a firm footing with strong employment growth, falling unemployment and resilient wage pressures,” Rosner wrote in a statement. “The strength of today’s December jobs report puts to rest lingering chances of a [quarter-point] cut in January and shifts the focus to the March meeting, where further rate cuts will depend on progress on inflation.”

Wages rose 3.9% on an annual basis in December, according to Friday’s report. Pay gains have moderated in recent years but still remain above pre-pandemic levels, when they rose around 3%.

This story is developing and will be updated.

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