December Market Commentary
This month we are focusing on the U.S. labor market. While having cooled from its red-hot state, it has settled into a relatively healthy position. Following a month of hiring disruptions due to hurricanes and strikes, businesses added 227,000 jobs in November. However, the uneven nature of recent job growth has led many to question the true health of the labor market.
Employment growth in 2024 has been concentrated in a few key sectors, primarily health care and government, which have contributed 41% and 21% of this year’s job gains, respectively. Healthcare’s hiring dominance seems less concerning as the sector is still addressing pandemic-related backlogs. However, employment growth dominated by the public sector, which tends to see increased hiring later in the economic cycle, may be viewed as a warning sign. That said, there are important nuances to consider.
Government employment as a sector currently accounts for 14.7% of total payrolls. Of the 21% growth referenced above, 90% has come from state and local levels, which appears less troublesome. Moreover, the sector’s share of payrolls remains below its pre-pandemic (2014 – 2019) average of 15.3%, suggesting its recent outsized growth reflects the continued uneven normalization of the labor market post-pandemic. Outside of these two sectors, sluggish manufacturing activity has been a headwind. Still, some cyclical sectors, including construction, leisure, and transportation, have seen solid job gains this year.
Despite data volatility, recent employment conditions and positive real wage gains have supported a resilient consumer and U.S. economy. With job openings back near pre-pandemic levels, this isn’t a labor market that is likely to boom, but it shouldn’t bust either. Steady economic growth and solid corporate profits should support a moderate pace of hiring in the year ahead, which should, in turn, continue to provide a tailwind and financial markets into 2025.
Source: JP Morgan Asset Management, which used sources BEA, BLS, J.P. Morgan Asset Management, Conference Board, S&P. All figures are y/y change, except for the unemployment rate (U.rate), which is a ratio. Nominal wages: Avg. hourly earnings of production and non-supervisory workers.
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