The US economy continued its positive trajectory in December 2023, with non-farm payroll numbers revealing an addition of 216,000 jobs. This figure surpassed both the previous month’s increase of 173,000 jobs and analysts’ expectations set at 170,000. Notably, significant contributions came from key sectors like government, healthcare, leisure, and hospitality.
Sector-wise Job Surge
The government sector took the lead by adding 52,000 jobs, showcasing robust growth. Healthcare followed suit with an increase of 38,000 jobs, while leisure and hospitality contributed 40,000 new positions. Additionally, construction witnessed a rise of 17,000 jobs, and social assistance saw an increase of 21,000. However, warehousing and transportation experienced a dip, shedding approximately 23,000 jobs.
Annual Job Growth and Sector Averages
Throughout 2023, the US economy witnessed a total addition of around 2.7 million jobs, marking the smallest increase since pre-pandemic levels in 2019. On average, approximately 225,000 new jobs were added each month. The government sector maintained a monthly average of 55,000 new jobs, while the leisure and hospitality sector, although showing improvement, struggled to reach pre-pandemic levels, with an average of 56,000 jobs per month.
Tight Labor Market and Implications for Federal Reserve
The relatively tight labor market serves as a key indicator for the US Federal Reserve when contemplating future monetary policy decisions. Recent hints from the Federal Open Market Committee (FOMC) minutes suggest a shift towards a more favorable view of rate cuts. The central bank expresses concerns about the potential adverse effects of an “overly restrictive” monetary policy on long-term economic growth, signaling a departure from its previous aggressive rate-hiking stance.
Uncertain Path of Rate Cuts
While the Federal Reserve signals a more dovish approach, the exact timing and extent of rate cuts remain undisclosed. The central bank emphasizes the need for sustained evidence of falling inflation before committing to a definitive course of action. In contrast, other major central banks like the European Central Bank (ECB) and the Bank of England maintain a cautious stance on rate cuts, emphasizing the importance of solid proof of inflation control before making such decisions.
SOURCE: Ref Image from The Guradian
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