The December employment report is anticipated to reveal a continued but moderated pace of job creation, with an estimated addition of 170,000 jobs, according to economists surveyed by The Wall Street Journal. This would represent a slowdown from November’s gain of 199,000 jobs. The unemployment rate is expected to tick up to 3.8% from 3.7% in November. The tightening labor market conditions, which prompted robust pay raises in early 2023, are showing signs of waning. Despite a decline in open positions and a lower rate of worker resignations, unemployment remains low, and demand for workers remains solid.
Throughout 2023, employers added over 200,000 jobs per month, reflecting a slower pace compared to the initial rebound from the COVID-19 pandemic but stronger than the years leading up to 2020. The gradual but steady pace of the labor market and a significant slowdown in inflation have fueled optimism about achieving a “soft landing,” where inflation eases without a recession.
Federal Reserve officials have indicated their comfort in maintaining the current benchmark federal funds rate as they await further evidence of inflation falling back to the 2% target. At their December meeting, most officials projected at least three rate cuts for 2024, signaling a potential pause in rate hikes. Despite the anticipation of a significant economic slowdown at the start of 2023 due to the Fed’s aggressive interest rate policy, the economy demonstrated resilience, supported by strong consumer spending and an increase in available workers.
The concentration of job gains in specific industries, such as leisure and hospitality, government, and healthcare, suggests some loss of momentum in the labor market. Looking ahead, forecasters expect a cooling in wage growth and a reduction in pandemic-era savings to impact consumer spending in 2024, potentially slowing down the labor market and overall economic growth. While concerns about a recession have eased given the labor market’s resilience and consumer strength, uncertainties persist.
