Update 835 – 256K Jobs Added in Dec. Too Much of a Good Thing for the Fed?
This morning’s Bureau of Labor Statistics jobs report that the U.S. added 256,000 jobs and unemployment ticked back down to 4.1 percent in December shows the American economy closing 2024 on a surprisingly strong note. The report — a critical data point Federal Reserve officials will consider in their upcoming interest rate setting meeting at the end of this month — may incline the Fed toward a pause in rate reductions.
On Monday, Fed Vice Chair of Supervision Michael Barr unexpectedly announced his intention to resign by the end of next month, ahead of the end of his term in 2026, attempting to preempt any attempt by Trump to fire him. Also this week, the Senate advanced its first immigration-related bill in nearly a decade — though amendments and debate are expected in the coming days. We take a look at these developments below.
Good weekends all…
Best,
Dana
Headline
Beyond Expectations: 256,000 Jobs Added in December
Total nonfarm payroll employment rose by roughly 256,000 jobs, greatly surpassing expectations, and the nation’s unemployment rate ticked down to 4.1 percent in December. The new data was included in the December jobs report released by the Bureau of Labor Statistics this morning and shows that President Biden will leave behind a strong economy when he leaves office later this month.
Over each of the four years of Biden’s term, average monthly job gains exceeded those of 2019, the final pre-pandemic year of Trump’s first term.
Source: Council of Economic Advisers
In 2019, the American economy added an average of about 166,000 jobs each month. Following pandemic-induced job losses in 2020 as sectors of the economy temporarily shut down, an average of about 604,000 jobs was added to the economy each month in 2021 as the labor market recovered. Average monthly job gains slowed from this overheated state over the following years but remained strong, with unemployment throughout the year at historical lows.
In 2023, about three million jobs were added to the economy, with an average of roughly 251,000 jobs being added each month. Overall, the American economy added 2.2 million jobs last year, with an average of about 186,000 jobs being added each month — remarkably strong but lower than in recent years.
Source: Council of Economic Advisers
Net job growth in November was revised down by 15,000 jobs, from the initial estimate of 227,000 to 212,000 jobs, while the October figure was revised up by 7,000 jobs, from 36,000 to 43,000 jobs, bringing the average monthly jobs gain over the past three months to a strong 170,000.
In November, the largest gains came in:
- Health care (+46,000) – An average of 57,000 jobs per month were added to the industry in 2024, the same as the average monthly gain in 2023.
- Leisure and hospitality (+43,000) – An average of 24,000 jobs per month were added in the industry in 2024, about half the average monthly gain of 47,000 in 2023.
- Government (+33,000) – An average of 37,000 jobs per month were added in the industry in 2024, below the average monthly gain of 59,000 in 2023.
- Social assistance (+23,000) – An average of 18,000 jobs per month were added in the industry in 2024, below the average increase of 23,000 per month in 2023.
The retail industry also added 43,000 jobs last month, following a loss of 29,000 jobs in the industry in November. Employment in the retail trade changed little in 2024, following an average monthly increase of 10,000 in 2023.
The unemployment rate ticked down to 4.1 percent in December from 4.2 percent in November, remaining low. The unemployment rate has remained fairly consistent between 4.1 and 4.2 percent for the past seven months.
Today’s report shows that the labor market remains strong after showing signs of cooling over the past year. With job gains strong and the unemployment rate low as the Federal Reserve has begun lowering interest rates from their elevated level, the U.S. economy is in good shape heading into the new year. The Fed’s interest-rate-setting committee has noted that it no longer views the labor market as a source of inflation but today’s strong data suggests that the committee may move slowly in cutting rates further over its next several meetings. The Federal Open Market Committee meets next to determine the fate of interest rates on January 28 and 29.
Other Developments
Senate Advances Laken Riley Act
On Thursday, the Senate acted to advance the Laken Riley Act with an overwhelming majority in a procedural vote, 84-9. Earlier this week, the bill passed the House with a 264-159 vote. The Laken Riley Act would authorize the detention of undocumented immigrants who are charged with theft or burglary. It would also allow states’ attorneys general to sue the federal government if they believed their states were harmed by its failure to enforce immigration laws.
Many of the 33 Democrats, including Minority Leader Chuck Schumer (D-NY), who joined Republicans in support of the bill did so under the assumption that they will be able to introduce amendments before a final vote. Some of the amendments may address concerns over the distinction of detainment-upon-arrest rather than conviction, as well as what would be states’ attorneys general broadened authority to interfere with federal policy, given the bill’s wording as it stands. Some Democrats, such as Senators John Fetterman (D-PA) and Ruben Gallego (D-AZ) have signaled they will likely support the bill without an amendment process.
The Laken Riley Act can be seen as the first step in a larger effort for Republicans to get early votes and wins on immigration and border-related bills in the 119th Congress. Whether it provides for a reasonable approach to the nation’s immigration problems is an open question. It does afford an opportunity for the Republican-held Congress to corner Democrats into tough votes.
Fed Vice Chair of Supervision Barr to Step Down
On Monday, the Federal Reserve Board announced that Fed Vice Chair of Supervision Michael Barr will resign on February 28 or at an earlier date should a successor be confirmed and that it would not take up any major rulemakings until a vice chair for supervision successor is confirmed. This suggests that rulemaking related to strengthening capital requirements are effectively dead for at least the next four years. Barr became vice chair for supervision on July 19, 2022, to serve for a four-year term.
The announcement comes after reports that some attached to the incoming Trump administration wanted Barr fired before his term expires next year. “I was worried that the risk of a dispute over the position would end up being a political distraction for the Federal Reserve and for me, and that that would end up detracting from our ability to serve our mission,” Barr said in an interview with Politico.
A protracted legal dispute over a President’s ability to remove a Senate-appointed federal banking regulator would undoubtedly detract the Fed from its mission, but a leading regulator’s acquiescence to the political will of a President seeking to undermine the Fed’s independence erodes the Fed’s mission immediately. Barr’s decision demonstrates an unwillingness to resist. It demonstrates that regulators like himself may be willing to capitulate at the whisper of a challenge. It is the rejection of an opportunity to defend the Fed’s independence.
20/20 Vision rejects any and all attempts by the incoming Trump administration to politically influence the independent leadership and work of the Federal Reserve and of every federal banking regulator. The Fed’s Vice Chair of Supervision position was created through the Dodd-Frank Act in the aftermath of the 2008 financial crisis and was intentionally designed to be insulated from political overreach. Independent federal regulators are crucial for the safety and soundness of the banking sector and the broader economy.
Federal Reserve Governor Bowman is viewed by some as a potential successor to Barr in the Vice Chair of Supervision role.
Look Ahead
Wednesday, January 15
- December CPI report
- Senate Homeland Security and Governmental Affairs Committee hearing: Hearings to examine the expected nomination of Russell Vought, to be Director, Office of Management and Budget
Thursday, January 16
- Senate Finance Committee hearing: Hearing to Consider the Anticipated Nomination of Scott Bessent, of South Carolina, to be Secretary of the Treasury
Senate Banking, Housing, and Urban Affairs Committee hearing: Nomination Hearing to consider the nomination of Eric Scott Turner to be Secretary of the U.S. Department of Housing and Urban Development