US job growth beats expectations in Dec; unemployment rate falls to 4.1%

U.S. job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on a solid footing, reinforcing the Federal Reserve's cautious approach to interest rate cuts this year.

  Nonfarm payrolls increased by 256,000 jobs last month after rising by a downwardly revised 212,000 in November, the Labor  Department said in its closely watched employment report on Friday.

  Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs following a previously reported 227,000 surge in November. Estimates for December's job count ranged from 120,000 to 200,000 positions added.

  Hiring has slowed in the aftermath of the U.S. central bank's hefty rate hikes in 2022 and 2023. Nonetheless, labor market resilience, mostly reflecting historically low layoffs, is powering the economy by supporting consumer spending via higher wages.

  The economy is expanding at well above the 1.8% pace that Fed officials regard as the non-inflationary growth rate. Fears are, however, mounting that pledges by President-elect Donald Trump to impose or massively raise tariffs on imports and deport millions of undocumented immigrants could derail momentum.

  Those worries were evident in minutes of the Fed's Dec. 17-18 policy meeting published on Wednesday, which noted "most participants remarked that ... the Committee could take a careful approach in considering" further cuts.

  Average hourly earnings increased 0.3% last month after gaining 0.4% in November. In the 12 months through December, wages advanced 3.9% after rising 4.0% in November.

  While business sentiment perked up following Trump's Nov. 5 election victory on hopes of tax cuts and a less-stringent regulatory environment, economists do not expect a surge in hiring in the near term.

  There have also been no signs in business surveys that companies are planning to boost head counts.

  The fall in the unemployment rate was from 4.2% in November.

  The government revised the seasonally adjusted household survey data, from which the unemployment rate is derived, for the last five years.

  Loosening labor market conditions have been underscored by steady rises in the number of people who have permanently lost their jobs, as well as the median duration of unemployment since September to a near three-year high of 10.5 weeks in November.

  That is consistent with the Job Openings and Labor Turnover Survey, showing the hires rate falling back to levels seen early in the COVID-19 pandemic.

  The Fed last month cut its benchmark overnight interest rate by another quarter-point to the 4.25%-4.50% range, bringing the total of reductions since it kicked off its easing cycle in September to 100 basis points. 

But it projected only two quarter-point rate cuts this year compared to the four it had forecast in September, acknowledging the economy's endurance and still-elevated inflation. The policy rate was hiked by 5.25 percentage points in 2022 and 2023.