The U.S. economy added more nonfarm jobs than expected in December.
Nonfarm payroll in the United States rose by 216,000 in December, an increase from the downwardly revised figure of 173,000 in November and above the market expectation of 170,000, the U.S. Bureau of Labor Statistics (BLS) reported Friday.
Despite the stronger-than-expected job numbers in December, nonfarm employment for October and November was revised down by 45,000 and 26,000, respectively. Therefore, seasonally adjusted employment for October dropped from +150,000 to +105,000, while seasonally adjusted employment for November fell from +199,000 to +173,000.
With revisions in October and November, BLS reports that 71,000 fewer jobs were added than previously reported.
“Although the headline jobs number of 216,000 came in stronger than expected, the details of the December jobs report were softer,” wrote PNC Chief Economist Gus Faucher to The Dallas Express. “There were big downward revisions to job growth in October and November, and much of the increase in employment came from the government.”
The sectors that saw an increase in employment were government (+52,000), leisure and hospitality (+40,000), health care (+38,000), social assistance (+21,000), and construction (+17,000). The sectors that lost jobs in December were transportation and warehousing (-23,000).
Overall, the U.S. economy saw an average monthly gain of 225,000 nonfarm jobs in 2023, which was less than the average monthly gain of 399,000 in 2022.
“The labor market had a strong 2023, although the pace of improvement slowed over the course of the year,” wrote Faucher. “Job growth is now near its sustainable rate… which would allow for continued job and income gains but slower inflation.” He added, “Job growth should continue in 2024, with the unemployment rate perhaps increasing a bit, creating somewhat more slack in the labor market.”
The number of Americans not employed is currently at historic lows. The unemployment rate was 3.7% in December, which was unchanged from the previous month and marks the longest stretch below 4% since the late 1960s.
According to Faucher, this is the kind of jobs report the Federal Open Market Committee wants to see.
“There is nothing in this report to indicate that inflation is set to reaccelerate,” he wrote. “But with wage growth still running a bit hotter than the Fed would like, the FOMC is not ready to cut the fed funds rate anytime soon.”
If the Fed does lower rates in 2024, Faucher says PNC projects cuts to begin in the second half of 2024.
