Private Sector Job Growth Slows in December, Wage Gains Also Cool

Private Sector Job Market Growth Slows in December, Wage Gains | Visionary CIOs

Private sector job market growth slowed more than expected in December, while wage increases dropped to their lowest pace in nearly three and a half years, according to a report released Wednesday.

A total of 122,000 jobs were added by private companies on a seasonally adjusted basis, a decrease from the 146,000 jobs added in November. This figure also fell short of the projected 136,000 jobs forecasted by economists. December’s job additions marked the smallest increase since August 2024.

Wage growth also showed a significant slowdown. Pay increased at an annual rate of 4.6%, marking the slowest wage growth since July 2021.

The labor market showed signs of a slower pace in both hiring and wage increases by the end of 2024, pointing to a more modest trend compared to previous months.

Layoffs Remain Low Despite Slower Hiring

While hiring has shown signs of slowing, there is little indication that layoffs are rising significantly.

The Labor Department reported on Wednesday that initial claims for unemployment insurance for the week ending January 4 totaled just 201,000, well below the projected 215,000 claims. This marked the lowest level since February 2024, indicating stability in the private sector job market despite the hiring slowdown.

Key Report on Nonfarm Payrolls Expected

The Private sector job market update arrives just days before the Bureau of Labor Statistics releases its nonfarm payroll report, a critical indicator of labor market health. Economists expect a gain of 155,000 jobs for the month, which would represent a noticeable decline compared to November’s stronger-than-expected gain of 227,000 jobs.

It is worth noting that the data provided in this report and the figures from the Bureau of Labor Statistics often differ, occasionally by significant margins.

Federal Reserve Watching Labor Data Closely

Federal Reserve policymakers are closely monitoring labor market data as they evaluate future monetary policy decisions. Although most Fed officials consider the job market stable, they are balancing the need to keep interest rates from being overly restrictive while ensuring job creation remains steady.

Additionally, Federal Reserve officials have shown increased confidence that inflation is stabilizing, though it remains slightly above the central bank’s 2% target. The reported slowdown in wage growth may support the view that wage pressures are not significantly driving inflation at this time.

Job Gains and Losses by Sector

Job creation was strongest in the education and health services sector, which added 57,000 positions in December. Other notable job gains were seen in:

  • Construction: +27,000 jobs
  • Leisure and hospitality: +22,000 jobs
  • Financial activities: +12,000 jobs

However, several sectors experienced job losses, including:

  • Manufacturing: -11,000 jobs
  • Natural resources and mining: -6,000 jobs
  • Professional and business services: -5,000 jobs

Large Companies Drive Most Hiring

The majority of job gains in December were reported from larger companies with over 500 employees. These businesses contributed 97,000 of the total jobs added during the month.

As the new year begins, the slowdown in both hiring and wage growth indicates a cooling labor in the private sector job market although layoffs remain minimal. Economists and policymakers will continue to monitor upcoming reports for a clearer picture of the economy’s direction.

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