In a sign of economic resilience, the U.S. economy added 256,000 jobs in December, surpassing expectations by 100,000 and signaling steady labor market strength despite rising inflation pressures. The unemployment rate ticked down slightly to 4.1% from November’s 4.2%, marking seven consecutive months of steady employment figures.
Retail Trade and Job Growth Surge
Retail trade led the job gains with a dramatic turnaround. After losing 29,000 positions in November, the sector added 43,000 jobs in December—a net swing of 72,000. Other industries, including health care, government, social assistance, and leisure and hospitality, also posted strong double-digit gains.
December’s job growth outpaced November's upwardly revised 212,000 figure, which had been boosted by workers returning from strike-related absences and hurricane disruptions.
Federal Reserve Balances Labor Market Strength with Inflation Worries
Federal Reserve Governor Christopher Waller expressed confidence in the labor market’s stability. “I continue to believe that the U.S. economy is on a solid footing,” Waller said. "I have seen nothing in the data or forecasts that suggests the labor market will dramatically weaken over coming months."
Despite the positive jobs report, inflation concerns loom. Consumer prices increased by 2.7% for the year ending in November, rising incrementally from 2.6% in October and 2.4% in September. This trend has led to debates within the Fed about whether continued interest rate cuts remain appropriate.
Policy Adjustments and Economic Projections
Since September, the Fed has lowered its benchmark interest rate three times, with cuts totaling a full percentage point to a target range of 4.25% to 4.5%. While these adjustments aimed to combat earlier labor market weakness and stalled inflation progress, rising prices have complicated the path forward.
In December, the Fed projected only two rate cuts for 2025, down from an earlier forecast of four. The likelihood of the Fed holding rates steady until at least June 2025 has risen, according to market forecasts.
Mortgage Rates Climb
Interest rate concerns have already rippled into the housing market, where the average 30-year mortgage rate rose to 6.93% this week—the highest since July. This spike came despite the Fed's rate cuts, highlighting uncertainty about the broader economy’s response.
Policy Challenges Amid Uncertainty
Minutes from the Fed’s latest meeting underscored heightened concern over inflation and potential economic disruptions linked to changing trade and immigration policies. Without explicitly referencing President-elect Donald Trump, the committee cited potential policy changes as factors contributing to increased inflation risks.
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes noted, underscoring the complex economic environment facing policymakers in 2025.
