US adds a whopping 216,000 jobs in December

The latest jobs report released by the Bureau of Labor Statistics (BLS) highlighted the resilience of the US economy and capped off a year where 2.7 million new jobs were created. This was one of many surprises in 2023, with the US economy continually showing signs of durability in a year where many market observers anticipated greater economic challenges. This isn’t to say the past twelve months were all roses and sunshine, but the December jobs report created a feeling of positive momentum heading into 2024.

The BLS counted 216,000 additional jobs in December, beating many estimates, while the unemployment rate remained unchanged from November (3.7%). The sizable sum was slightly below the average monthly job additions seen over the past year (226,000) but bucked a seasonal trend of decreases between November and December, being the first increase in job additions between these months since December 2018. (Also of note were revisions to the job-addition estimates for October and November, with employment growth being scaled back from 150,000 to 105,000 and from 199,000 to 173,000, respectively.)

The sectoral mix of December’s job additions is shown below, with Private Education & Health Services adding 74,000 jobs, Government adding 52,000 (driven mainly by Local Government, with 37,000 additions), and Leisure and Hospitality adding 40,000. These three sectors accounted for 77% of the job growth in December and 81% of the job growth for the year—standing in stark contrast to the 47% share of growth these sectors represented in the previous two years.

Finally, average hourly earnings rose to $34.27 in December, 0.4% above the prior month and 4.1% higher than one year ago. While this is good news for workers, growth in wages at this rate will be, at the margin, a tailwind for inflation. Even though the year-over-year increases in average hourly earnings have edged downwards since the 2023 peak of 4.7% in February, they’re still higher than the 3% growth desired to achieve 2% inflation. This component of the U.S. economy is something rennie–and the Federal Reserve–will be watching as potential future changes to the federal funds rate are contemplated.