The latest jobs report doesn't seem to increase the need for the Fed to change course anytime soon.
“The question is: Will the labor market provide further reason for the Fed to cut rates, or not?” Skanda Amarnath, executive director of Employ America, said before the announcement.
Let's take a look at how today's jobs report fits into the tug of war between Wall Street and the Fed.
What did economists expect and what did they get?
Economists polled by Bloomberg had predicted that nonfarm payrolls would likely rise by a net 175,000 in December, and the unemployment rate would rise slightly to 3.8%. The Labor Department reported that employment increased by 216,000 people, and the employment rate remained unchanged at 3.7%.
Rather than falling month-on-month, employment numbers rose from November, although on Friday the November figure was revised downward from 199,000 to 173,000. The number of cases for October was also lowered from 150,000 to 105,000.
During a period of unexpectedly strong job growth despite rising interest rates, salaried employment increased by 2.7 million people in 2023, an average increase of 225,000 jobs per month.
“I think what we're seeing right now is a soft landing,” Treasury Secretary Janet Yellen said on CNN on Friday, citing the view that the economic cycle is slowing in a way that avoids a painful recession. did.
Wages, another indicator closely watched by the Fed, also continued to rise. His average hourly wage rose 15 cents to $34.27 in December, giving him a 4.1 percent increase over the past 12 months.
White House Council of Economic Advisers Chairman Jared Bernstein told reporters Friday that “wages have been outpacing prices for some time now, but this is a very large percentage of workers, especially in terms of the purchasing power of their salaries. It's very important at that level.”
why is it important
Before this report, Fed watchers believed that a much larger slowdown (less than 100,000 job gains) would be needed to accelerate rate cuts.
“$150,000 to $200,000 is pretty healthy,” said Noel Dixon, senior macro strategist at State Street. “When you get below 100,000 people…people are going to start getting scared. Then you start talking about a hard landing.”
“The market may have gotten ahead of the curve by pricing in six rate cuts,” Dixon said.
“By any standard, the U.S. economy remains fairly strong,” he said.
Some believe the Fed wants to act sooner before something breaks down in the economy.
Employ America's Amarnath said a smart tactic for the Fed is to focus on January's inflation numbers, and if they confirm the trends of the past few months, “it makes a lot of sense to start a very active dialogue.” That's true,” he said. About the cut. ”
“If we continue to have these high interest rates for a long time, we will eventually run into problems,” he said. “This has been the Fed's core mistake over the past 30 years.”
How do voters and businesses view it?
A JPMorgan Chase & Co. survey of small business owners released this week showed that while recession expectations are fading, most are not optimistic about the overall U.S. economy. A slim majority of Americans continue to disapprove of President Joe Biden's handling of the economy, according to a poll conducted by The Economist and YouGov in late December and early January.
Martha Gimbel, who served on Biden's Council of Economic Advisers and is now a fellow at Yale Law School, said it has been a “gangbuster recovery” from the pandemic, but some sectors are still lagging behind. He said that
Gimbel's analysis, prepared before Friday's jobs report, found that: Industries with the strongest employment growth During the past 12 months, amid the backlash from the coronavirus disease (Covid-19), scenic spots and tourism transportation performed well, followed by performing arts, sports, and related industries.
This is evidence that there is still room for growth in the labor market, he says.
“Most of us have put the pandemic out of our minds,” she says. “But not all industries are able to do that.”
Katy O'Donnell contributed to this report.