US Labor Market Appears Set For Moderate Growth
The labor market is a key variable for assessing the US economy and on that front the near-term outlook looks encouraging. A relatively stronger pace of hiring suggests that the US economic expansion will continue in early 2025, which will help keep recession risk low.
Hiring slowed through much of 2024, but a firmer round of growth emerged in the fourth quarter. The 3-month moving average of monthly changes in nonfarm payrolls rebounded to 173,000 in November, the highest since May. (Moving averages help smooth out the misleading noise that sometimes distorts monthly comparisons.)
US weekly jobless claims, a leading indicator for payrolls, are also showing a more encouraging profile recently. The spring/early summer runup in new filings for unemployment benefits started reversing in August. By the end of 2024, the 6-month average of weekly claims fell to 223,000, which is close to the lowest level since July.
Overall, jobless claims that remain in the low-200,000-or-below range reflect a robust labor market. On that basis, recent data for this leading indicator paint an upbeat forecast for payrolls and, by extension, the economy overall.
A key question is how the incoming Trump administration will affect the labor market for the year ahead? Based on the president-elect’s campaign speeches, a mix of pro-growth but potentially inflationary policy changes are expected. If a firmer/stable labor market trend holds up in the upcoming December report and beyond, there’s a possibility that the Federal Reserve’s appetite for cutting rates will wane – all the more so if the higher inflation forecasts linked to Trump policies prove to be accurate.
For now, the combination of low layoffs and hints that hiring is stabilizing at a moderate pace suggest that the labor market will be a net-plus for the economy through early 2025.
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