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US job market strength leaves economists surprised

By Nithya Bose in Business News, posted January 8, 2024

The US job market was unexpectedly strong last month, much to the surprise of economists.

According to the Labor Department, US employers added 216,000 jobs, and the unemployment rate remained 3.7 percent.

Government hiring largely fueled the performance, defying predictions of job cuts as rising borrowing costs slowed the economy.

The positive data, with 2.7 million jobs added in the previous year, has shifted discussions from potential interest rate cuts to concerns about inflation.

The unexpected job growth has lifted hope the US central bank can address inflation without triggering a detrimental economic downturn.

Average hourly earnings in December rose by 4.1 percent compared to the previous year, indicating a positive trend in wage growth.

Analysts interpret the strength in the job market as a factor that should diminish speculation regarding the need for the Federal Reserve to reverse its course and implement interest rate cuts hastily.

Seema Shah, Chief Global Strategist at Principal Asset Management, said: "Jobs growth remains as resilient as ever, validating growing scepticism that the economy will be ready for policy rate cuts as early as March.

"Indeed, the recent run of labor market data generally point in one direction: strength."

Biden: "2023 was a great year for American workers"

President Joe Biden, acknowledging the challenges of convincing voters that a slowing economy can coexist with strength, celebrated the job figures.

He said: "This morning's report confirms that 2023 was a great year for American workers.

"I won't stop fighting for American workers and American families. I know that some prices are still too high for too many Americans."

However, analysts cautioned against overlooking weaknesses in the private sector, particularly in retail, financial activities, and leisure and hospitality.

These industries have yet to recover to pre-pandemic employment levels fully.

Additionally, the transportation and warehousing sectors experienced a decline in jobs.

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