US economy adds surprisingly strong 216,000 jobs in December

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By Dan Sears

US employers added a whopping 216,000 jobs in December, a surprisingly strong increase that will likely sow doubts as to when the Federal Reserve will begin cutting rates this year.

Last month’s supayroll growth came in over November’s higher-than-expected 199,000 advance — and well ahead of the 170,000 economists expected, according to Refinitiv data.

The figure marks an average monthly payroll gain of 232,000 over the previous 12 months — a strong figure considering the economy was gripped with stubbornly-high inflation and the highest borrowing rate Americans have seen in 22 years.

The Labor Department’s data revised November’s payroll gains down by 26,000, while October’s figure was revised down by 45,000.

The gains came as a surprise to economists, who were hoping for a softening labor market, which would make Federal Reserve officials more likely to implement interest rate cuts.

The Fed has lifted the benchmark federal funds rate to a 22-year high, between 5.25% and 5.5%, in hopes to tamp down inflation to its highly-coveted 2% target.

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In 2023, US employers added an average of 232,000 jobs each month as the labor market caps off a surprisingly-resilient year. AP

Data released by the Bureau of Labor of Labor Statistics on Friday also noted that the unemployment rate stayed the same, at 3.7%, a tick lower than the 3.8% rate Refinitiv economists also predicted.

Average hourly earnings — a key measure of inflation — increased 15 cents, or 0.4% for the month, to $34.27. Over the past 12 months, hourly earnings are up 4.1%.

The advance comes just after New York’s minimum-wage pay bump took effect, lifting the minimum wage in New York City, Long Island and Westchester County $1, from $15 to $16.

In the remainder of New York State — which is one of 22 states getting minimum wage hikes in the new year — the new minimum wage is $15, up from $14.20.

A separate report released by the Labor Department on Tuesday showed that job openings unexpectedly slowed to 8.7 million at the end of November, the lowest level since March 2021.

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According to Indeed, as of Dec. 29, 2023, open positions on the site declined more than 15% from a year earlier. The data supports figures from the Labor Department that showed job openings unexpectedly slowed at the end of November, to 8.7 million. Universal Images Group via Getty Images

The figure marks a decrease from the downward revised 9.3 million openings reported the previous month, a signal of shaky confidence in the job market.

Though the dip came out of the blue for economists, it backs up data recently released by American employment website Indeed, which found that as of Dec. 29, 2023, open positions on the site declined more than 15% from a year earlier.

Following the release of the latest Consumer Price Index in November — which tracks changes in the costs of everyday goods and services and showed that US inflation rose 3.1% — Fed chair Jerome Powell said the historic tightening of monetary policy is likely over.

Federal Reserve officials have suggested that the US economy is in for as many as three interest rate cuts in 2024. Fed chair Jerome Powell said last month that the historic tightening of monetary policy is likely over. Xinhua/Shutterstock

Powell dovetailed the report with projections from all 19 policymakers that showed near unanimity that borrowing costs would fall in 2024 — as many as three times.

While Fed policymakers did not want to take another rate hike off the table, it is no longer the central bank’s “base case,” he said in remarks made in a press conference following the end of the central bank’s final policy meeting of 2023.

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December’s CPI report is set to be released on Jan. 11.

Central bankers will decide on whether or not to keep interest rates steady, between 5.25% and 5.5%, following their next two-day meeting, which will conclude on Jan. 31.

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