US employers added a surprisingly strong 256,000 jobs in December, dimming hopes that the Federal Reserve will cut interest rates anytime soon — which sparked a sell-off on Wall Street.
The blowout number from the US Bureau of Labor Statistics — a massive jump from the month before that economists took as a sign the job market is recovering from a mid-2024 stumble — pushed back traders’ bets for the central bank to cut rates to September versus a previous consensus of June or July, according to Bloomberg.
The jobs number blew past expectations for an additional 153,000 jobs, according to FactSet. The unemployment rate ticked down to 4.1% from 4.2% — also beating economists’ expectations for it to remain steady.
Stocks slid after the jobs report, with the Dow plunging nearly 700 points, or 1.6% to 41,938.45 and the S&P 500 down 1.5%. Meanwhile, the 10-year Treasury yield ticked up — rising 0.1 percentage points this week.
“Friday’s jobs report showed that hiring ended 2024 very robustly, which is supportive of the higher for longer narrative on interest rates, since the labor market is not being negatively affected by nearly three years of elevated interest rates,” Paul Stanley, chief investment officer at Granite Bay Wealth Management, said in a note.
On the positive side for investors, average hourly earnings on nonfarm payrolls grew 10 cents, or 0.3%, to $35.69 — slower than the month-earlier increase . That supports the Fed’s thesis that the labor market isn’t a major cause of inflation.
The question became a hot topic last year as data showed that the job market is being propped up by immigration. Bill Adams, chief economist at Comerica Bank, said he expects the government data underestimated the number of new immigrants – which will lead to a higher revision of the unemployment rate.
“These workers have a harder time finding work than immigrants who have been in the US longer or native-born Americans, and are also younger and more likely to be looking for work than the rest of the population,” Adams said in a note.
If unemployed immigrants were largely undercounted by government data, the demand for labor might be a lot weaker than what the current unemployment rate indicates, Alexander Bick, economic policy advisor at the Federal Reserve Bank of St. Louis, said in a blog post last week.
However, from a statistical standpoint, recent immigration would still have a minimal effect on the unemployment rate, he added.
“This is largely because the share of recent immigrants in both the population and labor force remains small, even with the recent surge,” he said.
The Bureau of Labor Statistics updates its assumptions on immigration annually, and will announce revisions in February when it releases the January jobs report.
In 2024, about three-quarters of hiring occurred in healthcare and social assistance, leisure and hospitality, and government. In December, however, signs of strength showed in retail, professional and business services, information and finance.
The number of people unemployed for 27 weeks or more was little changed at 1.6 million, though this measure is up by 278,000 from a year earlier.
The retail sector added 43,000 jobs in December as employers hired seasonal staff to handle the holiday shopping surge.
