The United States labor market closed 2023 with another shock, defying all expectations. Despite the forecasts and the cooling of the economy due to the containment work of the Federal Reserve (Fed), the US machinery created 216,000 jobs, far exceeding estimates. The unemployment rate remained at 3.7% when a rebound to 3.8% was predicted.
All this demonstrates the strength of a labor market that has maintained the rate, despite the eleven increases in interest rates by the Fed since March 2022 to combat rampant inflation, which was intended, above all, to put the brakes on the pace of hiring, a factor that has ultimately driven strong economic growth.
Now the US central bank faces the dilemma regarding when to adopt a lowering of the price of money. The indications are that this would occur late in the year and a 75 percentage point contraction was expected for July, although all of this was based on greater containment in the labor market. Inflation is at 3.1%, according to November data, and the Federal Reserve has set the goal of lowering it to 2%.
Experts anticipated that, at most, the labor market would expand with 170,000 new jobs. But the stock market reacted negatively to this improvement in forecasts, with the fall of its indices and the rise of Treasury bonds, a sign that there is fear of an unforeseen reaction from the Fed, the analysts stressed, that it reconsider its position on the deadlines for cutting interest rates and to what extent. For now they were still thinking that this will occur in the middle of the year.
This Friday’s report was also surprising because the average hourly wage grew by 0.4% compared to the previous months and this represents an increase of 4.1% compared to December 2022. Both figures are higher than the forecasts of the of 0.3% and 3.9%, respectively, which is still a factor of inflationary pressure. In addition, layoffs for now remain near historic lows, below the pre-pandemic level.
These data mean a period of 25 consecutive months creating employment. In 2023 there were a total of 2.7 million new jobs (after revising the results for the months of October and November downwards by 70,000), with a monthly average of 225,000 jobs.
The unemployment rate has remained below 4% for a period of more than two years, an achievement that has not happened since the 1960s. And yet, former President Donald Trump and Republicans continue to talk on the eve of the election about a bad economy when the numbers show that the situation is much better compared to the previous administration’s deadlines, even before the pandemic.
The largest increases in job creation last month are focused on the 52,000 jobs linked to government areas, the 38,000 in health, while leisure and hospitality (hotels, bars, restaurants) added another 40,000 and social assistance, 21,000. Retail trade had an increase of 17,000 occupations and the industry remained unchanged compared to the beginning of 2022.
On the other hand, transportation and storage recorded a loss of 23,000 workers. The labor force also fell, which stood at 62.5%, almost 0.3% less than in November 2023.
