Non-farm payroll employment jumped by 216k in December, comfortably ahead of expectations calling for a gain of 175k. However, that strength is tempered by downward revisions to October and November of 45k and 26k, respectively.
- Hiring over the last three-months averaged 165k jobs per-month, down from the 180k averaged between September-November and below the 225k per month average pace for 2023 as a whole.
Private payrolls rose by 164k – building on the 136k reported in October. The service sector led the way (+142) with healthcare & social assistance (+58.9k) and leisure & hospitality (+40k) once again making large contributions. The bulk of the job losses were concentrated in transportation & warehousing – pulling back 22.6k last month. Goods-producing industries (+22k) were lifted by a healthy print in the construction sector (+17k). The public sector added another 52k jobs with state and local government payrolls finally matching their pre-pandemic totals.
In the household survey, the unemployment rate was unchanged at 3.7%, as the drop in employment (-683k) was offset by 676k fewer people in the labor force. The participation rate fell by 0.3 percentage points to 62.5% – the lowest reading since February 2023.
Wage growth picked up a bit in December, with average hourly earnings were up 0.4% month-on-month and 4.1% on a 12-month basis. The more truncated thee-month annualized rate of change ticked up to 4.3% (from 3.6% in October).
Key Implications
Quite the surprise from the U.S. labor market as job gains blew past expectations for the month. But December’s upward surprise must be weigh against the 71k downward revisions to the prior two months. The trend is still the Fed’s friend as the pace of hiring continues to slow, particularly for the private sector. The overall picture is one of restrictive monetary policy continuing to work through the economy and cool labor demand.
Longer-term treasury yields have been rising for a week now and today’s report will add some more pressure on bonds. This has come as market expectation for the timing of the first Fed cut has shifted from March to May. With inflation still simmering below the surface and the labor market continuing to crank out new jobs, we continue to expect any easing of policy to come in the second half of the year.
