U.S. Job Growth Analysis

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth likely slowed in December, yet the unemployment rate remained steady at 4.2%, supporting the Federal Reserve’s cautious stance on interest rates for the year.

The Labor Department’s employment report, set to be released on Friday, is expected to be unaffected by weather and strike disruptions that affected the previous months. Despite concerns about potential tariffs and immigration policies under President-elect Donald Trump, the labor market remains solid.

Sevin Yeltekin, a macroeconomist, stated, “The labor market is not as tight as it was post-pandemic, but still strong. Avoiding severe tariffs and restrictive immigration policies will help businesses maintain job growth.”

Nonfarm payrolls are anticipated to have grown by 160,000 jobs in December after a surge of 227,000 in November, reflecting a rebound from past disruptions. Overall, an estimated 2.144 million jobs were added during President Joe Biden’s term, averaging 179,000 jobs per month.

Despite job growth, average hourly earnings are predicted to rise by 0.3%, keeping annual wage increases steady at 4.0%. Job gains are likely focused on non-cyclical sectors like healthcare and government. However, no significant increase in hiring is expected post-election.

Andrew Husby from BNP Paribas cautions that tariffs and immigration remain key uncertainties affecting employment. There hasn’t been noticeable hiring growth, even after past elections.

Potential issues loom as the unrounded unemployment rate increased to 4.246% in November. This trend raises concerns that the unemployment figures may have been understated recently. A prior surge in the unemployment rate catalyzed the Federal Reserve’s policy adjustments, leading to multiple rate cuts following a 5.25 percentage point hike in 2022 and 2023.

Currently, the Fed has projected only two quarter-point rate cuts for the year, down from earlier forecasts. Economists are watching for signs of instability in the labor market, notably in rising permanent job losses and longer unemployment durations, necessitating ongoing observation.

Nancy Vanden Houten from Oxford Economics maintains that while current trends don’t indicate immediate concern, vigilance is crucial as labor conditions evolve.