The U.S. economy added 256,000 jobs in December, according to the Bureau of Labor Statistics (BLS) survey of employers. The increase was well above consensus expectations for a gain of 165,000. The prior two months were revised down by a cumulative 8,000.  Employment “trended up in health care, government, and social assistance. Retail trade added jobs in December, following a job loss in November,” according to BLS. A small decline in manufacturing was a rare weak note in an otherwise robust picture of the job market. For all of 2024, job growth was 2.2 million, down from the 3.0 million pace in 2023.

The BLS’s survey of households reported the unemployment rate at 4.1% in December, down from 4.2% in November. Both size of the labor force and employment grew by healthy amounts in the month. The unemployment rate has been either 4.1% or 4.2% for seven months in a row. Average hourly earnings — a proxy for wage growth — rose 0.3% for the month and 3.9% vs. a year ago. Both figures were slightly below consensus estimates.

Bottom line: The stronger than expected jobs report is consistent with other data suggesting the economy finished the year on a strong note. Initial financial market reaction is decidedly negative, with stock futures lower and bond yields higher. In the immediate aftermath of the report, Fed Funds futures are pricing in just one 25 basis point rate cut this year, with a probability of the Fed standing pat until summer. Market sentiment is fixated on the possibility that the economy could overheat, causing further problems on the inflation front. While core inflation has come down dramatically from the 2022 highs, progress has stalled in recent months.  

Source: Bloomberg, US Bureau of Labor Statistics.

Dave Donabedian, CFA, is chief investment officer of CIBC Private Wealth, serving in that capacity since 2009. His responsibilities include chairing the Asset Allocation Committee, as well as providing oversight of internal investment strategies and the external manager selection platform.​