Investing.com – U.S. employers likely cut back on hiring in December, capping a year of strong but slowing job growth that economists expect will continue through 2025.
Economists surveyed by Bloomberg estimated that jobs rose by 160,000 last month, reflecting a labor market that has emerged from shocks caused by hurricanes and strikes in previous months.
That would bring average monthly job growth to about 180,000 in 2024—a slowdown from the previous three years but still indicative of underlying labor market strength. Such an imprint would indicate a stable but not overheated U.S. economy and would bolster expectations for stock market growth in 2025.
Friday’s jobs report is not expected to change the Federal Reserve’s stance on interest rates. Policymakers are likely to maintain a gradual approach to rate cuts given the strength of the economy and the continued but slow decline in inflation.
Moreover, investors will review the minutes of the Fed’s December meeting on Wednesday, trying to understand how far officials differed on the recent quarter-point rate cut.
Forecasts also suggest the unemployment rate will remain at 4.2%, while wage growth is expected to slow slightly from the previous month. This indicates that the labor market, although resilient, is no longer adding to inflationary pressures.
Strategists in Citigroup The NYSE estimates that December payrolls increased by 120,000, well below Bloomberg estimates, and the unemployment rate was 4.4%.
“Over the next few months, we expect attention to shift from inflation to a still weakening labor market,” strategists led by Andrew Hollenhorst said in a note. “Concerns about elevated inflation should dissipate quickly as annual core PCE is forecast to be below 2.5% over various time horizons.”
With real Treasury yields and the dollar remaining elevated – even after the Fed cut rates by 100 basis points – the Citi team believes the economy “should continue to cool until the Fed resumes rate cuts.”
In contrast, Nomura strategists expect job growth to remain strong at 180,000 in December.
“Survey data shows that the labor market is improving, and we expect additional strength in the retail and construction sectors,” said strategists led by Jeremy Schwartz.
They believe the unemployment rate may have fallen, but remained at 4.2% in rounded terms.
Meanwhile, Morgan Stanley (NYSE:) expects the labor market to remain stable but show signs of slowing in December, forecasting a 150,000 payroll increase.