The Cosmic Watchdog

President Joe Biden will end his term with a relatively healthy labor market as the U.S. added 256,000 jobs in December and the unemployment rate ticked down to 4.1%.

Both those figures compare favorably to historical averages. For the month, analysts surveyed by Dow Jones had expected 155,000 jobs added on the month, down from a revised 212,000 in November, with the unemployment rate expected to have remained unchanged at 4.2%.

On their own, the latest figures suggest the U.S. economy has largely achieved the “soft landing” scenario sought by Biden: relatively low unemployment and relatively low inflation.

Today, layoffs remain subdued, though the pace of hiring has slowed.

Many in the U.S. have found the economic conditions that prevailed during large swaths of Biden’s tenure unacceptable — namely, a rate of inflation that began to soar not long after he took office in 2021 and which remains above the Federal Reserve’s 2% target.

That pace of price gains overshadowed a booming labor market that saw the unemployment rate drop to lows not seen in decades, with hundreds of thousands of jobs being added most months, as the U.S. economy roared back to life following the end of Covid-19 pandemic lockdowns.

While on average the pace of wage gains largely kept pace with inflation — and even as the stock market reached new heights — soaring costs have left consumers feeling psychologically worse off, something that played a major role in derailing Democrats’ efforts to maintain control of the White House and Senate.        

On balance, however, forecasters project that hiring will begin to pick up again, albeit slowly, as overall economic activity continues at a steady clip and interest rates keep ticking down in the wake of Federal Reserve easing.  

In fact, the Bureau of Labor Statistics also reported this week that job openings had ticked higher. That, wrote Julia Pollak, chief economist at ZipRecruiter, “hints at the possibility of better news ahead, with the potential for stronger hiring as 2025 gets underway.”

Small-business openings have especially been growing, Pollak said, which other surveys suggest is largely thanks to optimism about what the economy will look like once President-elect Donald Trump takes office.  

Consumer credit data released this week also show U.S. borrowers are seeking to pay down their debt balances after an aggressive run-up in purchasing behavior. That may suggest slower spending — but the same dataset showed borrowing for auto purchases surged in November, suggesting a more balanced picture of consumer health.   

Guy Berger, director of economic research at the Burning Glass Institute which specializes in the future of work, has said that for anyone looking for a job at the moment, the short-term picture is grim.

But in a new note, Berger said further labor market cooling should start to reverse in the coming months, given surveys showing U.S. firms increasingly optimistic about adding to head counts in 2025.

For instance, S&P Global reported this week that its business confidence services purchasing managers index was at an 18-month high, with the employment component increasing for the first time in five months. 

“There are a confluence of factors that will lead the labor market to stabilize and possibly even warm up a little,” Berger wrote.