(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 labor market is strong, and in an aggregate sense, it really doesn’t get much better than this,” Elizabeth Crofoot, senior economist at labor analytics firm Lightcast, told CNN. “There’s very robust job growth. We have low unemployment — it ticked down in the latest month. Layoffs are low. People have jobs, and they are spending, and that continues to bolster the economy and the labor market.”
The US has now added jobs for 48 months in a row, tying the second-longest period of employment expansion on record.
Friday’s data also appears to cap off a historic achievement for President Joe Biden: Barring revisions, he’s the first US president to oversee monthly job gains for the entirety of his presidency, according to BLS records that go back to 1939.
However, there are important caveats to note: President Barack Obama, who along with Donald Trump, helped oversee the largest employment expansion ever (113 months), had no monthly net job losses during his second term. Also, economic cycles carry over regardless of party, and the ups and downs of the labor market are influenced by factors beyond a single president.
Economists were expecting a net gain of 153,000 jobs and for the unemployment rate to stay at 4.2%, according to FactSet.
US stocks dropped sharply after the better-than-expected report, with the Dow falling by more than 600 points. 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 some uncertainty ahead
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.
October’s employment gains were revised up by 7,000 to 43,000; and November’s payroll gains were revised down by 15,000 to 212,000, according to Friday’s report.
Still, it’s likely December was a little 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.
Wages rose 3.9% on an annual basis in December, according to Friday’s report. Pay gains have moderated significantly in recent years but still remain above pre-pandemic levels, when they rose around 3%.
The solid labor market has helped fuel consumer spending, which in turn has kept the overall economy strong (GDP is growing at a robust 3.1% annualized rate) as inflation has eased — perhaps setting the stage for the rare achievement of a “soft landing” of price stabilization without a recession.
Still, the job market isn’t impenetrable. Job growth is slowing, hiring has dropped off, the manufacturing sector is exhibiting some weakness and people are staying unemployed for longer, fueling concerns that a greater weakening could be afoot.
The job gains also have been somewhat narrow. The lion’s share (about 75%) of the job gains in 2024 occurred in health care, government (specifically, state and local hires) and leisure and hospitality — three industries that were continuing to play catch-up from the pandemic.
Economists and other policymakers have sounded the alarm bells as to how Trump’s pledges such as stiff tariffs, mass deportations and plans to “cut the government down to size” could cause inflation to reaccelerate and raise the cost of living; exacerbate job shortages in industries such as agriculture, health care, food service, child care and construction; and hamper agencies that provide services to the general public.
“One downside risk for job growth is the potential for immigration restrictions from the incoming Trump administration, which would constrain the number of available workers,” Gus Faucher, chief economist at PNC Financial Services Group, wrote in a note on Friday.
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.”
Inflation has cooled substantially after peaking in the summer of 2022; however, prices are still rising above the Fed’s 2% target (the central bank’s preferred gauge was up 2.4% through November).
Progress on inflation has stalled out some in recent months as key contributors, particularly housing-related, remain high. Still, Fed officials expect inflation to continue to slowly cool; however, that progress could hinge heavily on moves made by the new administration, economists say.
“I think that’s really where the focus is: How are trade, tax and immigration policy going to impact inflation and the Fed’s decisions for 2025,” Lightcast’s Crofoot said. “With so much policy uncertainty and with a healthy labor market and pretty robust job growth, the smartest thing to do in terms of interest rates is to just wait out the data and see what those incoming policy changes are before they react one way or another.”