December 2024 jobs report:

Job growth was much stronger than expected in December, which may provide the Fed with less incentive to cut interest rates this year.

Nonfarm payrolls rose by 256,000 during the month, up from 212,000 in November and above expectations of 155,000 from the Dow Jones. Bureau of Labor Statistics reported Friday.

The unemployment rate fell to 4.1%, a tenth of a point lower than expected. The alternative measure, which includes discouraged workers and those holding part-time jobs for economic reasons, fell to 7.5%, a decrease of 0.2 percentage points and the lowest since June 2024.

Stock market futures contracts fell after the report while Treasury yields rose as traders priced in a lower likelihood of a Fed rate cut this year.

The report caps off a year that saw employment rates grow every month, although inconsistently and at times raising questions about whether a recession is looming. However, the last two months have shown that the labor market is still performing strongly as the Federal Reserve considers its next steps on monetary policy.

One area that Fed officials stressed was not a source of inflation was the labor market, where wages rose at a slightly lower rate than expected.

Average hourly earnings rose 0.3% month-on-month, in line with expectations, but the 12-month gain of 3.9% was slightly below expectations and suggests that wage inflation is at least becoming less influential. The average work week remained steady again at 34.3 hours.

Job growth came from the familiar sources of health care (up 46,000), leisure and hospitality (43,000), and government (33,000).

The retail sector also saw big gains, rising by 43,000 after losing 29,000 in November as the holiday shopping season approached. The sector saw payroll growth of 2.2 million for the full year, down nearly a third from the 3 million increase in 2023.

Revisions for prior months were less material than in the recent trend. The October number saw an upward change of 7,000 to 43,000, while the November number was reduced by 15,000 from the previous estimate.

At their December meeting, Fed officials considered the labor market mostly healthy despite its slowdown. The Federal Reserve voted at the meeting in favor of reducing the main borrowing rate by a quarter of a percentage point while indicating a slowdown in the pace of upcoming cuts.

Markets expect the Fed to hold its ground during the meeting later this month, with futures prices swinging after the jobs report to expect just one cut this year. Central bankers have recently expressed concern about the pace of inflation, which has remained above the Fed’s 2% target, largely due to a continuing rise in housing costs as well as the prices of some commodities.

The Households Report, which the Bureau of Labor Statistics uses to calculate the unemployment rate, provided a stronger picture of jobs. This number increased by 478,000 month-on-month, as the labor force grew by 243,000, and the proportion of working-age people holding jobs or looking for work stabilized at 62.5%.

The number of full-time workers increased by 87,000, while the number of part-time workers increased by 247,000. The level of unemployed workers decreased by 235,000.

The duration of unemployment rose to 23.7 weeks, the highest level since April 2022. However, the number who reported unemployment for 27 weeks or more fell to 1.55 million, down 103,000.

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