By Lucia Mutikani
WASHINGTON (Reuters) — U.S. employers hired more workers than expected in December while raising wages at a solid clip, casting some doubt on financial market expectations that the Federal Reserve would start cutting interest rates in March.
There were, however, some cracks in the closely watched employment report from the Labor Department on Friday. The economy added 71,000 fewer jobs in October and November than previously reported. While the unemployment rate held at 3.7% last month, that was because 676,000 people left the labor force, almost erasing all the gains in participation since February. Household employment fell sharply and the workweek was on average slightly shorter than in November.
Nonetheless, the report indicated that the economy avoided a recession last year and would likely continue to grow through 2024 as labor market resilience supports consumer spending.
«A gradual labor market cooldown remains in place,» said Scott Anderson, chief U.S. economist at BMO Capital Markets in San Francisco. «However, the lingering labor market resilience and strength in wage growth could keep the Fed on the sidelines for longer than the markets currently expect.»
Nonfarm payrolls increased by 216,000 jobs last month, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls rising by 170,000 jobs. The economy added 2.7 million jobs in 2023, a sharp step-down from the 4.8 million positions created in 2022.
That reflected cooling demand in the economy following 525 basis points worth of rate hikes from the U.S. central bank since March 2022. Roughly 100,000 jobs per month are needed to keep up with growth in the working age population.
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