US Economy marked strong Job growth in December

Key Takeaways:

• The rapidly rising prices caused the US economy to struggle last month, but job growth remained strong.
• Because of the labour market’s resilience, there is hope that the largest economy in the world won’t suffer a significant downturn this year.
• The most recent report indicates that prices in the US rose 7.1% from a year earlier, significantly higher than the normal 2% rate.

The US economy struggled last month under the weight of the effects of rapidly rising prices, but job growth remained robust.

Employers created 223,000 new jobs in December, decreasing the unemployment rate from 3.6% in November to 3.5%.

The labour market’s resilience has given rise to optimism that the largest economy in the world won’t experience a serious downturn this year.

The US central bank is raising borrowing costs to slow the economy and reduce price pressure.

Recent news of significant job cuts at banks and tech companies, such as Amazon, has attracted attention as businesses struggle with the effects of higher interest rates and also the possibility of lower consumer spending.

However, the US Labor Department’s monthly report revealed that nearly every sector of the economy was creating new jobs, with hospitality, healthcare, and construction businesses contributing to the growth.

According to Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has tracked such announcements since the 1990s, even though job losses are increasing—especially in the tech sector—the overall figures remained close to historic lows last year.

Even though employers appear to be actively preparing for a downturn, he said, the economy as a whole is still creating jobs.

Since 2021, when it boomed following the pandemic reopening, the US economy has been rapidly slowing.

Higher borrowing costs are impacting businesses in industries like banking and real estate, and rising prices are putting pressure on household budgets, raising questions about consumer spending, which is the main engine of the US economy.

According to the most recent report, prices in the US increased 7.1% from a year earlier, which is much higher than the healthy 2% rate.

According to analysts, the labour market’s strength makes the future uncertain because the Federal Reserve may need to raise interest rates significantly if it wants to keep inflation under control.

According to Ronald Temple, chief market strategist at Lazard, “the Fed cannot rest assured that inflation will back to its 2% target as long as the labour market remains this tight.”

The Labor Department reported that hourly wages increased 4.6% on average in December compared to the prior year. That was slower than in November, which analysts deemed encouraging for the effort to combat inflation.

It was mixed news for workers who have not seen pay increases keep up with price increases.

“The rise in consumer prices is outpacing the growth in worker pay. The household budgets are put under strain because of this. It will be crucial to see how that equation plays out in the coming months, including whether inflation pressures ease, “Mark Hamrick, a senior economist for Bankrate.com, said.