The BLS reported another sizable increase of 256,000 jobs in December, blowing past expectations. This is a clear sign that the US economy, especially the labor market, remains on solid ground, after a series of hurricanes and strikes clouded the picture for a couple of months.
The unemployment rate remains historically low as we move into the new year, and even ticked down last month. Overall, the economy added 2.2 million jobs in 2024, averaging 251,000 per month. Additionally, wages continue to increase at a solid pace, with average hourly earnings up 3.9% over the past 12 months.
Despite steady job growth, labor demand continues to cool, as it has done throughout the year. Revelio Labs’ data is showing a sizable decline in the last two months of the year especially, with our index of active job postings falling 6.0% month-over-month in December after decreasing 9.6% in November. Consecutive months of declines leaves overall active job postings below the low seen in December 2023, with the current level now at the lowest point since before the 2021-22 post-pandemic hiring boom.
Looking at where the economy is demanding labor, we see that the government and retail sector added to their active postings in December, while employers were also seeking more producers, development managers, and receptionists. Healthcare also had relatively limited declines last month, with stronger demand in government and healthcare coinciding with BLS data that shows that these noncyclical industries have helped underpin job growth this past year.
However, most industries and roles saw job postings decline in December, reflecting a broad decline in labor demand as we move into 2025.
The decline in labor demand was also broad-based geographically, with the majority of states showing a cooling in job openings. Revelio Labs data shows that 41 of 50 states saw a year-over-year decline in active job postings in December 2024, with 25 states showing double-digit drops. The decline in demand was felt across the United States, but west-coast states were especially hard hit, with California, Oregon, Washington, and Nevada all showing declines of over 10 percent.
That said, the economy remains strong, as the BLS’s December Jobs Report confirmed. Unemployment remains near historical lows, wage growth is strong, and the vast majority of Americans who want a job have a job.
In this environment, with inflationary pressures still lingering and potential policy shifts that are likely to be inflationary on the horizon, the need for additional rate cuts in the near term is coming into question. Policymakers at the Fed, once worried about a rapid cooling of the labor market, are likely re-thinking their calculations as we move into 2025.
