Economy added 256,000 jobs in December: The key facts and figures

The interpretation

“This is pretty hot,” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. “And, you know, there’s always talk about what the Fed’s going to do over the next year — well, a year is a long time, but this kind of puts a cut maybe a little further back.”

“We’ve been saying two cuts for a while,” he added. “We’ll probably stick with two cuts, but it certainly raises the possibility that they’ll go to one.”

What it means for … the Fed

The surprisingly strong growth in jobs will likely persuade Federal Reserve officials the economy is in strong shape and that it needs less support than necessary. That, in turn, will delay further interest rate cuts.

After a long period of very high interest rates designed to quash inflation, the Fed finally began cutting short-term rates in September. Investors expect that the central bank will continue lowering rates this year, but Friday’s report led them to push back the expected timing of the next rate cut from May to June.

What it means … for Trump

December’s jobs growth is welcome news for President-elect Donald Trump, who will now be the face of the economy. Trump will hope to continue the job growth notched under President Joe Biden. In fact, there has not been a monthly decline in jobs in four years.

In the coming year, Democrats will expectedly seize on any weakness in the labor market and attempt to blame it on Trump. Conversely, Trump will tout employment gains as proof that his presidency has been a boon for the economy. 

The underlying reality

December’s report suggested the labor market is still chugging along.

Trump will enter office with a resilient, although slowing, labor market. 

It is helpful to look at the overall trend for the labor market. The three-month moving average of job gains fell very slightly in December to 170,000, still above the rate needed to keep up with population growth.

Roughly 112,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.

Prime-age employment, relative to the overall population, is strong by historical standards.

Recession watch

The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It edged down to 4.1% in December after gradually creeping up over the past year.

Recessions entail a rising unemployment rate.

Friday’s data suggest that the U.S. labor market no longer triggers one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.

The indicator had been triggered in recent months but is no longer signaling a recession.

Industries to watch

The leisure and hospitality sector in the past few months has finally exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country.

Construction employment has remained robust, even as the housing market has taken a massive hit over the past few years, as mortgage rates have soared alongside the Fed’s rate hikes. That’s in part because of a huge backlog of construction of multifamily housing over the past year. Economists will watch closely for any sign of slowing hiring in construction.

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Unemployment rates by race and ethnicity

The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years. After drifting up in recent months, unemployment rates dropped for all races and ethnicities in December.