US labor market finishes 2024 on high note, adding 256,000 jobs in December as unemployment falls to 4.1%

The US economy added more jobs than forecast in December while the unemployment rate unexpectedly fell.

Data from the Bureau of Labor Statistics released Friday showed 256,000 new jobs were created in December, far more than the 165,000 expected by economists, and higher than the 212,000 seen in November. The unemployment rate fell to 4.1% from 4.2% in November. December marked the most monthly job gains seen since March 2023.

Revisions to the unemployment rate in 2024 also showed the labor market was stronger than initially thought. The cycle high for the unemployment rate had initially been 4.3% in July but that figure was revised down to 4.2% in Friday’s release.

“There is no denying that this is a strong report,” Jefferies US economist Thomas Simons wrote in a note to clients on Friday.

Wage growth, an important measure for gauging inflation pressures, rose 0.3% in December, in line with economists expectations and below the 0.4% seen in November.

Compared to the prior year, wages rose 3.9% in December, below the 4% seen in November. Meanwhile, the labor force participation rate was flat at 62.5%.

The strong picture of the US labor market presented in Friday’s report pushed out investor bets on when the Federal Reserve will cut interest rates next. Traders now don’t see a more than 50% chance of the Fed cutting interest rates until June, per the CME Fed Watch Tool. A day prior, investors had favored a cut in May.

“You’re seeing this steady but slightly cooling labor market trend, which is very encouraging from a Fed perspective,” EY chief economist Gregory Daco told Yahoo Finance. “I think the attention will actually pivot back towards inflation developments over the course of the next three months.”

Stocks sank following the report, with futures tied to all three major averages down near 1%. Meanwhile, the ten-year Treasury yield (^TNX), a recent headwind for stocks, added about 8 basis points to reach 4.78%, its highest level since November 2023.

“The problem here now is if you’re looking for rate cuts based on a weakening labor market..stop looking for those,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance. “It’s not going to happen in the immediate term.”

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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