Federal jobs report surprises with another swing up

MANHATTAN (CN) — The U.S. economy added 256,000 jobs for the last full month of the Biden presidency, eclipsing expectations and setting the stage for a cool but not stagnant jobs market in 2025.

The number, well above the 155,000 median forecast and in tune with them two previous months’ reports, further indicates that while the labor market certainly has slowed it hasn’t shrunk nearly as much as many expected. The unemployment rate also dropped unexpectedly from 4.2% to 4.1%.

While in months past revisions offset large headline jobs numbers, this time the revisions did very little to change the narrative. The jobs reports for October and November were revised down by just 8,000 jobs total.

Most of the job gains were in health care, government, and social assistance — which saw increases of 46,000, 33,000, and 23,000 jobs respectively. Retail trade also netted 43,000 jobs last month, though over the last 12 months that sector has essentially flatlined.

Hourly earnings also remained fairly steady, increasing once again by 0.3% for December and showing a 3.9% increase over the past year. Those bumps show wages have moderately outpaced inflation for the year, which had been a concern in previous years.

The surprise drop in the unemployment rate was “for all the right reasons, thanks to a strong 478,000 increase in the household survey measure of employment,” Thomas Ryan, an economist at Capital Economics, wrote in an investor’s note. “If job growth continues at its current pace, we could see further drops in the unemployment rate.”

The jobs report payroll company ADP released on Wednesday also disappointed, coming in at 122,000 private sector jobs gained in December compared with the 136,000-140,000 most analysts had predicted.

Service-providing jobs have propped up most of the recent job gains, and this time was no different. Nearly all the December job increases ADP reported were among the education, health care and hospitality sectors. Western states also represented the bulk of the job increases, picking up 82,000 of the final print.

“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” ADP Chief Economist Nela Richardson said in a statement. “Health care stood out in the second half of the year, creating more jobs than any other sector.”

The job gains also were concentrated mostly among companies with at least 500 employees, as smaller- and medium-sized companies gained only 14,000 total jobs.

Economists say other employment data are consistent with a “no hire, no fire” job market. The JOLTS report released on Tuesday by the Bureau of Labor Statistics was essentially the same as the previous one, showing 8.1 million job openings.

“The November JOLTS report painted a familiar picture of the labor market, with the pace of layoffs keeping net job growth positive despite a slow pace of hiring,” Nancy Vanden Houten at Oxford Economics wrote in an investor’s note.

The number of layoffs also remained relatively the same, with 1.8 million in November, the Job Openings and Labor Turnover Summary data showed, while the number of employees quitting decreased to 3.1 million, with 451,000 quits fewer recorded over the year.

Unemployment has been dipping lately, hitting an 11-month low to kick off 2025, but experts claim the decrease is likely due to seasonal factors. The latest data from the Labor Department shows a 10,000-claim decline in unemployment for the week ending Jan. 4.

“Continued claims are off their recent peak but are still elevated, which is not a surprise,” Vanden Houten wrote.

Follow @NickRummell