Job gains exceed expectations in December

Employers kept a brisk hiring pace in December, exceeding economists’ expectations by 43,000 jobs. Jobs increased by 216,000 in December, up from 173,000 in November, according to data released by the Bureau of Labor Statistics. Economists were expecting an addition of 170,000 jobs.

With December’s numbers in, a total of 2.7 million jobs were added to the U.S. economy in 2023, an average monthly gain of 225,000, according to the BLS. That’s less than the 4.8 million increase of 2022.

“While this is below the job growth in 2021 and 2022, when the economy was rebounding from the sharp job losses in 2020, it is still a much higher pace of job growth than we had before the pandemic,” Bright MLS Chief Economist Lisa Sturtevant said in a statement.

Meanwhile, the unemployment rate remained unchanged at 3.7% in December and the number of unemployed Americans also showed little change at 6.3 million.

“Even though the headline jobs numbers beat estimates, the internals of the jobs report show that the labor market is slowing down,” HousingWire Lead Analyst Logan Mohtashami said. “We have had negative revisions to the labor report. We had negative revisions of 71,000 jobs loss to previous months. Also, the prime-age employment rate has declined by 0.5% from the recent peak. This week’s job openings data showed that the quits and hires ratio is also below pre-COVID-19 levels.”

Job gains occurred mainly in government, health care, social assistance and construction in December, while transportation and warehousing posted fewer jobs. 

Construction employment continued to trend up, with the sector adding 17,000 jobs in the last month of 2023. Construction added an average of 16,000 jobs per month in 2023, slightly less than the 2022 average monthly gain of 22,000.

Average hourly earnings for private employees grew by 4.1% in 2023. On Wednesday, the BLS reported that job openings slipped to 8.8 million in November, down from an upwardly revised 8.9 million in October.

What to expect at the next Fed meeting

Today’s labor report and next Thursday’s inflation data will be key inputs for the Federal Reserve as it looks to fulfill its dual mandate of full employment and price stability.

“The market is currently expecting a rate cut by March, and investors will be looking for clues about the timing of any rate reductions,” Realtor.com Chief Economist Danielle Hale said in a statement. “The labor market has weathered higher rates rather well, giving the Fed more leeway to prioritize inflation fighting.”

In terms of implications for the housing market, the Mortgage Banker Association Senior Vice President and Chief Economist Mike Fratantoni anticipates that “these data are likely to keep interest rates from falling further at this point, but we expect mortgage rates to drift down over the year as the economy slows.”