(WASHINGTON) — A jobs report to be released on Friday will provide a key gauge of the nation’s economic health, just days before the inauguration of President-elect Donald Trump.
The findings could also help determine whether the Federal Reserve will cut interest rates when officials meet later this month.
U.S. hiring has defied doomsayers for much of President Joe Biden’s term in office. Stubborn inflation, high interest rates and a contentious presidential campaign have proven no match for a resilient labor market.
Economists expect the U.S. to have added 155,000 jobs in December. The figure would mark a slowdown from the previous month but it would keep the labor market growing at a steady clip.
In November, employers added a robust 227,000 jobs. The unemployment rate ticked up to 4.2%, but it continued to hover near a 50-year low.
Alongside steady hiring, inflation has eased and the economy has expanded, giving rise to hope that the U.S. can achieve a soft landing.
Inflation has slowed dramatically from a peak of more than 9% in June 2022, but price increases remain higher than the Fed’s target of 2%. The pace of price increases has ticked up in recent months.
The Fed dialed back its fight against inflation over the final months of last year, lowering interest rates by a percentage point. Still, the Fed’s interest rate remains at a historically high level of between 4.25% and 4.5%.
Last month, the Fed predicted fewer rate cuts in 2025 than it had previously indicated, suggesting concern that inflation may prove more difficult to bring under control than policymakers thought just a few months ago.
A solid jobs report that matches economists’ expectations could give the Fed more reason to delay interest rate cuts, since such a sign of economic strength may ease concern that a continuation of high interest rates would tip the economy into a downturn.
Instead, the Fed could wait and see if inflation falls closer to target levels, while remaining somewhat assured that the labor market will remain sturdy.
If the jobs report falls short of economists’ expectations, however, central bankers may view potential interest rate cuts with a heightened sense of urgency.
Speaking at a press conference in Washington D.C. on Wednesday, Fed Chair Jerome Powell said the central bank may proceed at a slower pace with future rate cuts, in part because it has now lowered interest rates a substantial amount.
Powell also said a recent resurgence of inflation influenced the Fed’s expectations, noting that some policymakers considered uncertainty tied to potential policy changes under Trump.
“It’s common-sense thinking that when the path is uncertain, you get a little slower,” Powell said. “It’s not unlike driving on a foggy night or walking around in a dark room full of furniture.”
Trump has proposed tariffs of between 60% and 100% on Chinese goods, and a tax of between 10% and 20% on every product imported from all U.S. trading partners.
Economists widely forecast that tariffs of this magnitude would increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers.
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