U.S. payrolls grew by 256,000 in December, lowering the unemployment rate slightly to 4.1%, according to a report released Friday by the U.S. Bureau of Labor Statistics.
Employment rose in health care, government and social assistance. Retail businesses added jobs in December after cutting positions in November. The unemployment rate continues to be steady, moving between 4.1% and 4.2% for the past seven months. Total payroll employment rose by 2.2 million in 2024, an average monthly gain of 186,000. That was down from the 3 million jobs created in 2023.
The strong employment data, which topped consensus expectations by nearly 100,000, sent the stock market into a tailspin Friday morning over fears of renewed inflation and that the economy may be too strong for the Federal Reserve to continue cutting interest rates later this year.
Wells Fargo economists Sarah House and Michael Pugliese wrote that job growth lowered the unemployment rate to “right in the sweet spot of the Fed’s projects for a ‘not too hot and ‘not too cold’ labor market.”
But the good economic news spelled trouble for home loan rates. In early Friday trading, the 10-year Treasury yield, which influences the rate of home loans, was up to 4.79%, its highest level in more than a year. While the Treasury rate began to fall slightly from its high as the morning progressed, it signaled that home loan interest rates would probably continue to rise.
On Thursday, Freddie Mac reported that the 30-year fixed rate mortgage had climbed to an average of 6.93% as of Jan. 9, up from last week’s 6.91%. Rates have gained nearly a full percentage point since reaching a 2024 low of 6.08% for the week of Sept. 26. One year ago, the 30-year rate was at 6.66%.
Lawrence Yun, the chief economist for the National Association of Realtors, said the positive economic news is temporarily bad news for interest rates.
“Good economic data do not have to be associated with higher interest rates. More production and higher productivity can bring down inflation and interest rates,” Yun said. “However, higher rates now are due to lingering inflation, which has not been fully contained. The oversupply in the apartment sector implies that inflation will be much calmer in the future. But until then, mortgage rates will stick near the current elevated rates. In the meantime, consumers are looking for inventory, and more choices have led to gains in home sales in many markets.”
