PHOTO COURTESY NMMAThe Labor Department said today that the U.S. economy added a robust 256,000 jobs in December, making it less likely that the Federal Reserve will approve an interest rate cut this month that could help boost sales in the recreational marine industry during the important winter boat-show season.
“The jobs report continues to show a healthy underlying economy with a growing number of new jobs, lower unemployment rate and increasing wages,” Chad Lyon, managing director, global inventory finance, at Wells Fargo, told Trade Only Today. “As we look ahead to the upcoming boat shows, this should be a sign of a confident consumer.”
The job gain was the best since last March. Prerelease estimates of the economy’s performance in December had varied widely. Goldman Sachs predicted a gain of 125,000 jobs; Bloomberg Economics was closest to the mark with its forecast of 268,000.
The unemployment rate fell to 4.1%, and the government gave a shout-out to the job market’s stability, noting that the rate has been either 4.1% or 4.2% for the past seven months. Nonetheless, January’s first measure of the consumer’s mood was somewhat pessimistic. The University of Michigan said today that its preliminary Consumer Sentiment Index for the month was at 73.2, down from 74 in December.
Consumers’ views of current economic conditions improved in the survey, but their inflation expectations soured.
“Consumer sentiment was essentially unchanged in January, inching down less than 1 index point from December, well within the margin of error,” Joanne Hsu, director of the university’s Surveys of Consumers, stated in a press release. “Assessments of personal finances improved about 5%, while the economic outlook fell back 7% for the short run and 5% for the long run.
“January’s divergence in views of the present and the future reflects easing concerns over the current cost of living this month, but surging worries over the future path of inflation,” she added. “Year-ahead inflation expectations soared from 2.8% last month to 3.3% this month. The current reading is the highest since May 2024 and is above the 2.3-to-3% range seen in the two years prior to the pandemic. Long-run inflation expectations rose from 3% last month to 3.3% this month. This is only the third time in the last four years that long-run expectations have exhibited such a large one-month change.”
The Federal Reserve’s policy-making committee meets Jan. 28-29, and it will have all of January’s data to consider before making a decision on interest rates. The December jobs gain and the evidence it provides of a warming economy could lead the central bank to fear a resurgence of inflation.
“Looking at all the data, it appears the focus might be shifting to concerns around inflation,” Lyon said. “Long-term interest rates have been increasing, and seeing the strength in December’s report, it could mean that markets are moving their focus away from growth concerns and back to inflation. If inflation risk does become the center of focus, it is unlikely the Fed will be reducing rates during the January meeting.”
There will be a dozen boat shows in January, and six of them are being held this weekend, with Boston, Chicago and Atlanta among the venues.
“We have a positive view for recreational boating heading into 2025, especially after the Fort Lauderdale show and the ones in November/December showed improvement in the market,” Lyon said. “The industry is showing strong resiliency; they have worked through challenges in 2024 to position themselves for a good 2025. It’s difficult to predict the early shows; weather will play a role and most likely long-term rates. That said, the recreational boat market should benefit over the year from a healthy economy.”
The Labor Department’s December report again had good news for workers’ pay, as average hourly earnings rose by 10 cents, or 0.3%, to $35.69, slightly below the 0.4% rate of the increases for the previous four months.
During the past 12 months, earnings have increased 3.9%, remaining well above the current rate of inflation. That level of pay gains continues to support solid growth in consumer spending, which the Commerce Department said rose in November by 0.4% after climbing by a downwardly revised 0.3% in October.
Separately, the government said in mid-December that the U.S. economy grew 3.1% in the third quarter, up from a previous estimate of 2.8%.
The Labor Department revised its job totals for October and November, resulting in a net reduction of 8,000 jobs. The disappointing October figure was revised upward by a modest 7,000 jobs, to 43,000, and the November total became 212,000, down 15,000 from the initial total.
The government said health care was again the category leader in December, adding 46,000 jobs, and the retail sector tied for second with 43,000 as stores added workers for the traditionally busy holiday shopping season. The leisure and hospitality category also added 43,000 jobs as bars and restaurants staffed up in expectation of Americans treating themselves to restaurant meals and other outings.
Other notable category gains in December were in government employment, which added 33,000 jobs, and social assistance, which added 23,000. Employment showed little or no change in other major industries in December.
The labor force participation rate — the measure of the population that is in the workforce — was 62.5%, unchanged from the previous month. The Labor Department said the rate has stayed in a narrow range of 62.5% to 62.7% since December 2023.
Ahead of Friday’s jobs report, the Labor Department said Tuesday in its monthly Job Openings and Labor Turnover Survey that vacancies nationally rose to 8.1 million in November from an upwardly revised 7.8 million the previous month.
The November figure represented a six-month high. The increase was led by the professional and business services sector, which had 273,000 unfilled positions.
Hiring was flat, with the October total at 5.3 million. Layoffs were also nearly identical, at 1.8 million.
The number of vacancies per unemployed worker remained at 1.1, unchanged from the previous three months and about half of the top ratio of more than 2-to-1 in the early months of 2022.
The ADP Research Institute said Wednesday in its National Employment Report for December that private-sector employment rose by 122,000 jobs, down from a gain of 146,000 the previous month.
Annual pay was up by 4.6% on a year-over-year basis among people who stayed in their current jobs. Among job-changers, the gain was 7.1%.
“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” Nela Richardson, the ADP’s chief economist, stated in a press release. “Health care stood out in the second half of the year, creating more jobs than any other sector.”
The institute said hiring at large employers led December’s growth — 97,000 of the new hires occurred at companies that employ 500 or more. Education/health services and construction were the category leaders.
Growth was greatest in the West, where 82,000 were hired.
