Total non-farm employment increased by 256.000 in December. Employment tended to rise in health care, government and social assistance. Retail added jobs in December, after losing a job in November. Employment increased by 2.2 million in 2024 (median monthly earnings of 186,000), which is lower than the increase of 3.0 million in 2023 (average monthly earnings of 251,000).
Healthcare added 46,000 jobs in December, with gains in home healthcare services (+15,000), nursing and residential care facilities (+14,000), and hospitals (+12,000). Healthcare added an average of 57,000 jobs per month in 2024, the same as the average monthly gain in 2023.
Retail added 43,000 jobs in December, after losing 29,000 jobs in November. In December, employment increased at retailers of clothing, clothing accessories, footwear and jewelry.
(+23000); retailers of general goods (+13000); retailers of health and personal care Traders of building materials, garden equipment and accessories lost their jobs (-11000).
Overall, retail employment changed slightly in 2024, after an average monthly increase of 10,000 in 2023.
Government employment continued to trend to the upside in December (+33,000). The government added an average of 37,000 jobs per month in 2024, which is lower than the average monthly earning of 59,000 in 2023. Over the course of the month, employment continued to trend upward in the state government +10,000.
Social assistance added an average of 18,000 jobs per month in 2024, which is lower than the average monthly earnings of 59,000 in 2023.
The labor force participation rate, at 62.5 percent, remained unchanged throughout the month and remained in a narrow range from 62.5 percent to 62.7 percent since December 2023. The employment-to-population ratio, at 60.0 per cent, changed slightly throughout the month and throughout the year.
Market Reactions to U.S. Non-Farm Employment Change
Traders and economists expect the Nonfarm Payrolls report to show that the U.S. created 164,000 new net jobs, with average hourly earnings up 0.3% month-on-month (4.0% y/y) and the U3 unemployment rate stabilizing at 4.2%.
Last month’s jobs report exceeded expectations in terms of overall job growth and revision of previous estimates, but much of that strength can be attributed to recovery from previous weather-related disruptions. More importantly, the household survey was relatively weak, resulting in a low participation rate and a high unemployment rate (to 4.0%).
For this month, the outlook is tepid, with economists expecting “only” 164,000 net new jobs and the unemployment rate to remain steady at 4.2%. Among the key areas to watch is the average hourly wage gauge, which has risen slightly in recent months, raising concerns about accelerating wage growth and potentially limiting the Fed’s scope to cut interest rates further if it continues to do so.
As the bottom left box below indicates, traders are skeptical that the Fed will offer a lot in terms of additional interest rate cuts this year, with only one 25 basis point cut expected in the first half of the year and only a 50/50 chance of a second cut in the second half of 2025. With few jobs and inflation reports left ahead of the Fed’s “decisive moment,” this week’s jobs report may not be as impactful as the market as other more impactful releases immediately.
The employment component of the ISM manufacturing PMI fell to 45.3 from 48.1 last month.The Institute for Supply Management’s service sector employment index stood at 51.4 compared to 51.5 last month. The ADP employment report showed 122,000 net new jobs, down 146,000 jobs last month.
Expectations for the current month and the impact of the change in US Non-Farm Employment on interest rates
Looking ahead, analysts are cautiously optimistic about the trajectory of the labor market. While the December report provided encouraging signs, challenges remain. The constant threat of inflation, especially in sectors such as energy and food, can affect consumer purchasing power and, consequently, job growth. In addition, geopolitical uncertainty, including tensions in Eastern Europe and potential disruptions in global supply chains, could pose risks to the labor market.
The outlook for upcoming NGPY change reports is mixed. Some analysts expect job growth to begin to slow as the economy moves closer to full employment. Others argue that the labor market still has room for growth, especially in sectors that are lagging behind in recovery. The Fed’s actions in the coming months will play a crucial role in shaping the job landscape. As the central bank navigates the delicate balance between supporting economic growth and controlling inflation, its decisions will have far-reaching implications for the labor market.
When weighing our internal data and models, key indicators point to a reading roughly as expected in this month’s NFP report, with key job growth likely to come somewhere in the 150-200k range, albeit with a large range of uncertainty given the current global backdrop.
Regardless, the monthly fluctuations in this report are very difficult to predict, so we don’t count too much on any forecasts (including our own). As always, other aspects of the release, notably the closely watched average hourly earnings figure of 0.4% m-o-m in the latest NM report..
As we will explain below, the US dollar rose to test its highest levels in more than two years, but the recent pause near those high levels prevented the pair from heading to the nonfarm payrolls report in an overbought state.
