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    World Bank Warns of Energy Price Surge if Mideast War Spreads

    A new economic report predicted a year of weak growth and said the world faced a decade of “wasted opportunity.”The global economy is at risk of a “wasted” decade and the weakest stretch of growth in 30 years, the World Bank warned on Tuesday, saying a sluggish recovery from the pandemic and crippling wars in Ukraine and the Middle East are expected to weigh heavily on output.In its semiannual Global Economic Prospects report, the World Bank projected that the growth in world output will slow further in 2024, declining to 2.4 percent from 2.6 percent. Although the global economy has been surprisingly resilient, the report warned that its forecasts were subject to heightened uncertainty because of the two wars, a diminished Chinese economy and the increasing risks of natural disasters caused by global warming.The converging crises in recent years have put the world economy on track for the weakest half-decade in 30 years.“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s chief economist.Global growth is projected to slow for the third straight year in 2024. Developing countries are bearing the brunt of the slowdown, with high borrowing costs and anemic trade volumes weighing on their economies.Although policymakers have made progress in bringing inflation down from its 2022 high, the war in Gaza between Israel and Hamas is threatening to become a broader conflict that could spur a new bout of price increases by causing the cost of oil and food to spike.“The recent conflict in the Middle East, coming on top of the Russian Federation’s invasion of Ukraine, has heightened geopolitical risks,” the report said. “Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation.”The recent drone and missile attacks in the Red Sea by the Iranian-backed Houthi militia have already affected international commerce by pushing up oil prices and freight and insurance rates while diverting maritime traffic to a much longer and costlier route around Africa.Economists at Capital Economics wrote in a report this month that the redirecting of trade ships away from the Red Sea is unlikely to lead to a resurgence of global inflation, but they suggested that if the war became a broader regional conflict it could pose inflationary risks.The disruptions to shipping routes follow a year in which, other than during worldwide recessions, global trade growth was the slowest in the past 50 years, according to the World Bank.If the conflict in the Middle East does not widen, the World Bank expects that global oil prices will edge lower this year as growth weakens and production of oil increases.Beyond the ongoing wars, signs of fragility in the Chinese economy also remain a worry. World Bank economists pointed to lingering weakness in China’s property sector and lackluster consumer spending as evidence that the world’s second-largest economy will continue to underperform this year. They suggested that could pose headwinds for some of China’s trading partners in Asia.Chinese growth is expected to slow to 4.5 percent this year from 5.2 percent in 2023. Outside the pandemic-induced downturn, that would be China’s slowest expansion in 30 years.Europe and the United States are also poised for another year of weak output in 2024.The World Bank projects that economic growth in the euro area will rise to 0.7 percent in 2024 from 0.4 percent in 2023. Despite easing inflation and rising wages, tight credit conditions are expected to constrain economic activity.Growth in the United States is expected to slow to 1.6 percent this year from 2.5 percent in 2023. The World Bank attributes the slowdown to elevated interest rates — which are at their highest level in 22 years — and a pullback in government spending. Businesses are expected to be cautious about investing because of economic and political uncertainty, including around the 2024 election.Despite such slow growth, Biden administration officials say they deserve credit for corralling inflation while keeping the economy afloat.“I think we’ve made tremendous progress,” Treasury Secretary Janet L. Yellen told reporters on Monday. “It’s very unusual to have a period in which inflation declines as much it has while the labor market remains strong.”She added: “But that’s what we’re seeing, and that’s why I say we’re enjoying a soft landing.” More

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    Top Goldman Sachs analyst says the world is moving into a new super cycle

    The world economy is moving into a “different” super cycle, Peter Oppenheimer, head of macro research in Europe at Goldman Sachs, told “Squawk Box Europe.”
    Artificial intelligence and decarbonization are two of the key factors that could have a positive impact during this new cycle, he said.
    Oppenheimer also pointed out that there are historical parallels to current developments that could hold lessons for the future.

    A screen displays the Dow Jones Industrial Average after the closing bell on the floor at the New York Stock Exchange on Dec. 13, 2023.
    Brendan Mcdermid | Reuters

    The global economy is moving into a new “super cycle,” with artificial intelligence and decarbonization being driving factors, according to Peter Oppenheimer, the head of macro research in Europe at Goldman Sachs.
    “We are moving clearly into a different super cycle,” he told CNBC’s “Squawk Box Europe” Monday.

    Super cycles are commonly defined as lengthy periods of economic expansion, often accompanied by growing GDP, strong demand for goods leading to higher prices, and high levels of employment.
    The most recent significant super cycle that the world economy experienced began in the early 1980s, Oppenheimer said, discussing content from his newly launched book “Any Happy Returns.”
    This was characterized by interest rates and inflation peaking, before a decades-long period of falling capital costs, inflation and rates, as well as economic policies such as deregulation and privatization, he explained. Meanwhile, geopolitical risks eased and globalization grew stronger, Oppenheimer noted.
    But not all of these factors are now set to continue as they were, he added.
    “We’re not likely to see interest rates trending down as aggressively over the next decade or so, we’re seeing some pushback to globalization and, of course, we’re seeing increased geopolitical tensions as well.”

    The Russia-Ukraine war, tensions between the U.S. and China largely relating to trade, and the Israel-Hamas conflict which is raising concerns on the wider Middle East are just some geopolitical themes that markets have been fretting over in recent months and years.

    While current economic developments should theoretically lead to the pace of financial returns slowing, there are also forces that could have a positive impact — namely artificial intelligence and decarbonization, Oppenheimer said.
    AI is still in its early stages, he explained, however as it is used increasingly as the basis for new products and services, it could lead to a “positive effect” for stocks, he said.  
    The hot topic of AI and productivity, which has often gone hand-in-hand with debates and concerns around human jobs being replaced or changed, will likely impact the economy.
    “The second thing is [that] we haven’t yet seen, and I think we’re relatively positive that we will see, [is] an improvement in productivity on the back of the applications of AI which could be positive for growth and of course for margins,” Oppenheimer said.
    Despite AI and decarbonization both being relatively new concepts, there are historical parallels, Oppenheimer explained.
    One of the historical periods that stands out is the early 1970s and early 1980s, which he said were “not so dissimilar” to current developments. Elevated inflation and interest rates were perhaps more structural issues than compared to now, he said, however factors including growing geopolitical tensions, rising taxes and enhanced regulation appear similar.
    In other ways, current shifts can be seen as reflective of changes even further back in history, Oppenheimer explained.
    “Because of this tremendous twin shock that we’re likely to see, positive shock of technological innovation at a very rapid pace together with restructuring of economies to move towards decarbonization, I think that’s a period that’s more akin really to what we saw in the late 19th century,” he said.
    Modernization and industrialization fueled by infrastructure and technological developments alongside significant increases of productivity mark this historical period.
    Crucially, these historical parallels can provide lessons for the future, Oppenheimer pointed out.
    “Looking back in time, cycles and structural breaks do repeat themselves but never in exactly the same way. And I think we need to sort of learn from history what are the inferences that we can look at in order to position best for the sort of environment we’re moving into.” More

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    The 2023 U.S. economy, in a dozen charts

    The U.S. labor market ended the year strong, creating more than 200,000 jobs in the last month of the year and nearly 2.7 million jobs in all of 2023, when seasonally adjusted.
    Consumer spending remained robust throughout the year, with bright spots in travel and entertainment.
    There were some trouble areas for consumers, however, with mortgage rates high and existing home sales low.

    A pedestrian holds an umbrella as they walk along a street in the rain in Times Square, New York, on Sept. 26, 2023.
    Ed Jones | AFP | Getty Images

    The state of the U.S. economy may be a chief concern among Americans, but 2023 wound up as a pretty good year for the macroenvironment.
    Spending remained high, markets posted big gains and the Federal Reserve’s battle against inflation showed signs of cooling — without freezing. Then there’s the almost logic-defying resilience of the job market.

    The U.S. labor market ended the year strong, creating more than 200,000 jobs in December, according to figures released Friday by the U.S. Bureau of Labor Statistics. While previous job creation estimates for October and November were revised downward by a combined 75,000, the unemployment rate remained at a low 3.7%, and December marked the 36th consecutive month of job creation for the U.S. economy.

    In total, the U.S. created nearly 2.7 million jobs in 2023, when seasonally adjusted. That figure came despite concerns that the Federal Reserve’s ongoing fight against inflation through interest rate hikes might cool the labor market and put a chill on consumer spending.
    Neither of those concerns came to fruition, however. In fact, consumer spending remained robust throughout the year, with monthly advanced retail sales staying above the $600 million mark for most of 2023, proving that despite many economic headwinds, U.S. consumers could not be deterred.

    Here are nine other charts that show how the economy rounded out 2023.

    Inflation, wages and spending

    While inflation continues to be top of mind for U.S. consumers, the rate of inflation cooled significantly in 2023. Meanwhile, wages rose throughout the year, eventually outpacing price increases.

    U.S. consumers were in a mood to spend, particularly on experiences: 2023 was officially the year that travel rebounded, with the Thanksgiving holiday period breaking U.S. records. Nearly 150 million passengers were screened by the Transportation Security Administration across U.S. airports in November and December.

    Americans spent on entertainment, too. With major hits such as “Barbie,” “Oppenheimer” and Taylor Swift’s The Eras Tour concert film, the U.S. box office came back in a big way last year from its Covid-19 pandemic lows.

    Markets

    Even assets such as crypto saw a rebound in 2023 after hitting a low in November of the previous year. Bitcoin prices ended the year at almost three times that previous low.

    Interest rates and housing

    After its historic rate increases in 2022, the Federal Reserve tempered its war on inflation and only raised rates at four of its eight meetings in 2023. While the central bank’s target range for interest rates is the highest it has been since 2006, recent comments from Chair Jerome Powell have Fed watchers optimistic that rate cuts may be coming in 2024.

    There were some trouble areas for consumers, however. Mortgage rates continue to be high. The average 30-year fixed rate in October was nearly triple what it was at the end of 2020 — although rates came down significantly by the end of the year — and existing home sales remain low, according to data from the National Association of Realtors. Until more housing inventory comes online, those issues are likely to persist into 2024.

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    U.S. Steel Acquisition Proposal Tests Biden’s Industrial Policy

    The president is under pressure from Democrats and Republicans to block the sale to Japan’s Nippon Steel, which could upset a key foreign ally.U.S. Steel is an iconic example of the lost manufacturing muscle that President Biden says his economic policies will bring back to the United States.But last month, the storied-but-diminished company announced plans to be acquired by a Japanese competitor. That development has put Mr. Biden in an awkward bind as he tries to balance attempts to revitalize the nation’s industrial sector with his efforts to rebuild international alliances.Mr. Biden’s administration has expressed some discomfort with the deal and is reviewing the proposed $14.1 billion takeover bid by Japan’s Nippon Steel. The company is offering a hefty premium for U.S. Steel, which has struggled to compete against a flood of cheap foreign metal and has been weighing takeover offers for several months.The proposal has quickly become a high-profile example of the difficult political choices Mr. Biden faces in his zeal to revive American industry, one that could test the degree to which he is willing to flex presidential power in pursuit of what is arguably his primary economic goal: the creation and retention of high-paying union manufacturing jobs in the United States.Mr. Biden is under pressure from the United Steelworkers union and populist senators from both parties, including Democrats defending crucial swing seats in Ohio and Pennsylvania this fall, to nix the sale on national security grounds. The senators contend that domestically owned steel production is critical to U.S. manufacturing and supply chains. They have warned that a foreign owner could be more likely to move U.S. Steel jobs and production overseas.“This really should be a no-brainer,” Senator Josh Hawley, Republican of Missouri, said in an interview last week. “I don’t know why it would be difficult to say, my gosh, we’ve got to maintain steel production in this country, and particularly a company like this one, where you have thousands of workers in good union jobs.”U.S. Steel executives say the deal would benefit workers and give the merged companies “world-leading capabilities” in steel production. They announced last month that Nippon Steel had agreed to keep the company’s headquarters in Pittsburgh and to honor the four-year collective bargaining agreement that the steelworkers’ union ratified in December 2022.Other supporters of the takeover bid say blocking the sale risks angering a key American ally. Mr. Biden has courted Japanese collaboration on a wide range of issues, including efforts to counter Chinese manufacturing in clean energy and other emerging technologies, and welcomed Japanese investment in new American manufacturing facilities including for advanced batteries.Wilbur Ross, a former steel company executive who served as commerce secretary under President Donald J. Trump, wrote last week in The Wall Street Journal that there is “nothing in the deal from which the U.S. needs defending. Attacks by Washington pols only create unnecessary geopolitical tensions, and those, not the acquisition itself, could endanger American national security.”Adding to the cross-pressures on Mr. Biden: It is unclear what would happen to the 123-year-old U.S. Steel if the administration scuttles the deal and whether doing so would actually guarantee greater job security for the company’s nearly 15,000 North American employees.U.S. Steel executives say the deal with Nippon Steel would benefit workers, but skeptics of the deal are urging President Biden to review it to prevent lost steel production and jobs.Lawrence Bryant/ReutersU.S. Steel has faced challenges for decades because of intensifying foreign competition, particularly from China, which has flooded the global market with cheap, state-subsidized steel. American presidents have spent years trying to bolster and protect domestic steel makers through a mix of subsidies, import restrictions and so-called Buy America requirements for government purchases.“No U.S. industry has benefited more from protection than the steel industry,” Scott Lincicome, a trade policy expert at the libertarian Cato Institute think tank, wrote in a 2017 research paper.In recent years, presidents have increased those protections further. Mr. Trump imposed tariffs on imported steel, including from Japan. Mr. Biden has partially rolled back those levies in an attempt to rebuild alliances. Mr. Biden also included strict Buy America provisions in sweeping new laws to invest in infrastructure, clean energy and other advanced manufacturing.Those efforts have not come close to bringing back the levels of domestic steel production that the United States enjoyed in the 1970s — or even of recent decades. Raw steel production reached higher levels under Presidents Bill Clinton, George W. Bush and Barack Obama than it has under Mr. Biden or Mr. Trump.Employment in the industry fell steadily in the 1990s and mid-2000s. In 2022, there were just over 83,000 workers in iron and steel mills in the United States, which was less than half the number from 1992.Senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, and Mr. Hawley and J.D. Vance of Ohio, both Republicans, urged Mr. Biden to review the proposed U.S. Steel sale to guard against lost steel production and jobs. Mr. Brown cited Nippon Steel’s failure to notify or consult with union leaders ahead of making its bid for the company.“Tens of thousands of Americans, including many Ohioans, rely on this industry for good-paying, middle-class jobs,” he wrote in a letter to Mr. Biden last month. “These workers deserve to work for a company that invests in its employees and not only honors their right to join a union, but respects and collaborates with its work force.”The calls for an administrative review of the deal largely focused on the Committee on Foreign Investment in the United States, which is known as CFIUS and headed by Janet L. Yellen, the Treasury secretary. The committee scrutinizes possible sales of American firms to foreign ones for possible national security threats, then issues recommendations to the president, who can suspend or block a deal.Shortly before Christmas, Mr. Biden appeared to grant the request for review, while stopping short of saying he would block it.Lael Brainard, who chairs the White House National Economic Council, said in a news release that Mr. Biden welcomed foreign investment in American manufacturing but “believes the purchase of this iconic American-owned company by a foreign entity — even one from a close ally — appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.”The administration, Ms. Brainard said, “will be ready to look carefully at the findings of any such investigation and to act if appropriate.”Steelworkers cheered the move. David McCall, president of United Steelworkers International, said in a statement that Mr. Biden was “demonstrating once again the president’s unwavering commitment to domestic workers and industries.”Independent experts say it would be well within historical norms for the committee to evaluate the sale. That will likely include a detailed economic analysis of whether the deal could lead to diminished steel production capacity in the United States, said Emily Kilcrease, a CFIUS expert and senior fellow at the Center for a New American Security.But Ms. Kilcrease said that based on the committee’s past decisions, she expected the review to stop well short of a recommendation to kill the sale. Instead, she said, CFIUS might require an agreement from Nippon Steel to maintain certain levels of U.S. employment or production as a condition of the sale’s going through.“I would be shocked if this deal got blocked,” she said.Mr. Hawley said the choice was ultimately Mr. Biden’s — and a test of his commitment to the industry.“If the administration wants to block the sale, they absolutely have grounds to do it and the legal authority,” he said. “So it’s just a question of, do they want to? And will they have the guts to do it?” More

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    The Mystery of the Coin That Shouldn’t Exist

    Scientists recently analyzed a Peruvian 10-cent piece with an unexplained origin.A decade ago, a funny money mystery fell into the hands of scientists and students at the Pontifical Catholic University of Peru in Lima.The university had been acquiring 19th- and 20th-century Peruvian coins from local dealers, and graduate students in the chemistry department were analyzing the pieces for their thesis work. But one coin, a 10-cent piece known as a dinero, stood out.The dinero was marked “1899.” The problem was that official records indicated no coins of that denomination were minted in Peru that year — according to the people who made the money, the coin never existed.Most international coin catalogs don’t list 1899 dineros, said Luis Ortega, a chemist at the university. And in the rare cases that they do, there is often only a note of “counterfeit” with no further detail, Dr. Ortega said. “No one was able to provide more information about it.”Now Dr. Ortega and Fabiola Bravo Hualpa, a doctoral student, believe they have shed new light on the mystery of the coin that came from nowhere. In a paper published last year in the journal Heritage Science, they described how they subjected one of the two known 1899 dineros to a barrage of scientific analyses, illuminating its possible origins and the role it might have played during an unstable era of South American history.To the naked eye, the 1899 coin resembles other dineros: It’s silver in color and features the same coat of arms and seated woman that represents the goddess of liberty. And it’s remarkably similar in size to other dineros minted around the turn of the 20th century — about the dimensions of a U.S. dime.But when Dr. Ortega and Ms. Bravo Hualpa bombarded the 1899 coin with X-rays and measured the light it re-emitted, they determined that the dinero was largely made of copper, zinc and nickel. This alloy is known as nickel silver. It’s commonly used to make silverware and ornamental objects and has a silvery appearance, but it contains no silver. Genuine dineros produced by the Lima Mint, on the other hand, are roughly 90 percent silver.Dr. Ortega and Ms. Bravo Hualpa also found that the 1899 dinero contained traces of iron, cobalt and lead. Those impurities imply that the coin was counterfeited long ago, not more recently, the researchers suggest. Such contaminants are characteristic of older alloys because of limitations in technology at the time. “The refining methods were not as good as they are now,” Dr. Ortega said.The presence of impurities, paired with the coin’s worn faces, suggests that it was produced in the 19th or 20th centuries, the researchers concluded. But given that nickel silver wasn’t widely used for coins or tokens in Peru at that time, it’s likely that this coin was created abroad, the researchers suggest. Its producer might have therefore been wholly unaware that no dineros were officially minted in 1899.“The counterfeiter probably didn’t realize that that coin didn’t exist,” Dr. Ortega said.He said that an influx of low-value coinage would have been welcomed in Peru at the dawn of the 20th century. The country’s economy was reeling from the recent War of the Pacific, and the government was focusing on printing larger-denomination paper bank notes to pay off international loans; in 1899, the Lima Mint produced roughly one-tenth the number of silver coins it produced just five years earlier.As a result, people in Peru were using coins from neighboring nations or even cutting their own country’s coins in half to conduct small transactions. “Counterfeiters found a field of opportunity,” Dr. Ortega said.Dineros were low-denomination coins used by everyday people. Studying this coin, and the economic and political situation that prompted its creation, can therefore be illuminating. “If you want to study our society, you don’t want to look at a Ferrari,” said Laura Perucchetti, an archaeometallurgist at the British Museum in London, not involved in the research. “You want to look at a Volkswagen or a Ford.”Dr. Ortega is not finished studying counterfeit coins and their historical context. He plans to meet with a collector based in Lima who amassed an assortment of coins ostensibly minted from the 1830s through the 1960s. Another 1899 dinero has already surfaced in that collection, and he is on the lookout for more.“There must be a few around,” Dr. Ortega said. More

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    U.S. Added 216,000 Jobs in December, Outpacing Forecasts

    Hiring has throttled back from 2021 and 2022, but last year’s growth was still impressive by longer-term standards.The U.S. labor market ended 2023 with a bang, gaining more jobs than experts had expected and buoying hopes that the economy can settle into a solid, sustainable level of growth rather than fall into a recession.Employers added 216,000 jobs in December on a seasonally adjusted basis, the Labor Department reported on Friday. The unemployment rate was unchanged at 3.7 percent.Although hiring has slowed in recent months, layoffs remain near record lows. The durability of both hiring and wage gains is all the more remarkable in light of the Federal Reserve’s aggressive series of interest rate increases in the past couple of years. But a range of analysts warns that the coast is not yet clear and says the effects of those higher rates will take time to filter through business activity.“The real test for the labor market begins now, and so far it is passing the test,” said Daniel Altman, the chief economist at Instawork, a digital platform that connects employers with job seekers.Financial commentary in the past year has been dominated by dueling narratives about the economy. Most economists warned that the Fed’s driving up borrowing costs at a historically rapid pace would send the economy into a downturn. Heading into 2023, over 90 percent of chief executives surveyed by the Conference Board said they were expecting a recession. And many leading analysts thought that price increases could soften only if workers experienced significant job losses.But the resilience of the overall economy and consumer spending has so far defied that outlook: In June 2022, inflation was roughly 9 percent. Inflation has since tumbled to 3 percent while the unemployment rate has been largely unmoved.The economy gained 2.7 million jobs in 2023.Annual change in jobs More

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    U.S. payrolls increased by 216,000 in December, much better than expected

    December’s jobs report showed employers added 216,000 jobs for the month while the unemployment rate held at 3.7%. That compared with respective estimates of 170,000 and 3.8%.
    The hiring boost came from a gain of 52,000 in government jobs and another 38,000 in health care-related fields such as ambulatory health-care services and hospitals.
    Average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, both higher than the respective estimates for 0.3% and 3.9%.

    The U.S. labor market closed out 2023 in strong shape as the pace of hiring was even more powerful than expected, the Labor Department reported Friday.
    December’s jobs report showed employers added 216,000 positions for the month while the unemployment rate held at 3.7%. Payroll growth showed a sizeable gain from November’s downwardly revised 173,000. October also was revised lower, to 105,000 from 150,000, indicating a slightly less robust picture for growth in the fourth quarter.

    Economists surveyed by Dow Jones had been looking for payrolls to increase 170,000 and the unemployment rate to nudge higher to 3.8%.
    A more encompassing unemployment measure that includes discouraged workers and those holding part-time jobs for economic reasons edged higher to 7.1%. That increase in the “real” unemployment rate came as the household survey, used to calculate the unemployment rate, showed a decline in job holders of 683,000 as the ranks of those working multiple jobs increased by 222,000.
    The labor force participation rate, or the share of the civilian working-age population either employed or looking for a job, slid to 62.5%, down 0.3 percentage point to its lowest since February and down 676,000 on a monthly basis.
    The report, along with revisions to previous months’ counts, brought 2023 job gains to 2.7 million, or a monthly average of 225,000, down from 4.8 million, or 399,000 a month, in 2022.

    Major averages meandered through the day as markets reacted to a lower than expected reading from the ISM services gauge. The measure posted a lower than expected 50.6 reading, reflecting only narrow expansion, and the lowest level of the employment component since May 2020.

    Treasury yields were mostly higher, particularly in longer duration.
    The December hiring boost as reflected in the Labor Department report came from a gain of 52,000 in government jobs and another 38,000 in health care-related fields such as ambulatory health-care services and hospitals. Leisure and hospitality contributed 40,000 to the total, while social assistance increased by 21,000 and construction added 17,000. Retail trade grew by 17,000 as the industry has been mostly flat since early 2022, the Labor Department said.
    On the downside, transportation and warehousing saw a loss of 23,000.
    The report showed that inflationary pressures, despite receding elsewhere, are still prevalent in the labor market. Average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, both higher than the respective estimates for 0.3% and 3.9%. The average workweek edged lower to 34.3 hours.

    Fed funds futures markets also reacted, lowering the odds of a March rate cut from the Federal Reserve to about 56%, according to the CME Group.
    “Today’s report speaks to the bumpy road ahead for the Fed’s journey back to 2% inflation,” said Andrew Patterson, senior international economist at Vanguard. “The decision of when to first cut policy rates remains one for the second half of the year in our view.”
    Friday’s data adds to the case that the U.S. economy continues to defy expectations for a slowdown, despite an inflation-fighting campaign from the Fed that has produced 11 interest rate hikes since March 2022 totaling 5.25 percentage points, the most aggressive monetary policy tightening in 40 years.
    At their December meeting, Fed officials released projections that indicate they could enact three quarter-percentage point interest rate cuts this year. Markets, though, expect the central bank to be more aggressive, with futures traders pricing in up to six cuts.

    The belief that the Fed can start cutting is fueled by the view that inflation will continue to recede after peaking at a 41-year high in mid-2022. Inflation is still above the Fed’s 2% target but has been making steady progress lower since the increases began.
    However, Friday’s report could challenge the market narrative of a substantially easier Fed.
    “Jobs growth remains as resilient as ever, validating growing skepticism that the economy will be ready for policy rate cuts as early as March,” said Seema Shah, chief global strategist at Principal Asset Management. “Indeed, the recent run of labor market data generally points in one direction: strength.”
    Economic growth has held solid after consecutive negative-growth quarters to start 2022. Gross domestic product is on track to increase at a 2.5% annualized pace in the fourth quarter, according to the Atlanta Fed’s GDPNow real-time tracker of economic data.
    Consumers have been resilient as well. Holiday spending likely hit a record this year, rising 5% to $222.1 billion, according to projections by Adobe Analytics.
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    Here’s where the jobs are for December 2023 — in one chart

    Getty Images

    The U.S. labor market beat expectations again in December, adding 216,000 jobs to close out the year while the unemployment rate held steady at 3.7%.
    Yet the job gains were slower than the same period a year ago, with the three-month average gain dropping to 165,000 a month compared with an average of 284,000 in December 2022, according to Nick Bunker, director of economic research for North America at the Indeed Hiring Lab.

    “After entering 2023 with a sonic boom, the US job market is headed into 2024 at a comfortable cruising speed,” Bunker said. “The pace of job creation is strong but not overwhelming, unemployment is low and stable, and job openings are plentiful.”

    Bunker noted that just a few sectors – education and health services, government, and leisure and hospitality – accounted for more than 75% of the job growth in December. He cautioned that “turbulence lurks on the edges of the radar” with labor force participation dropping toward year-end while wage growth accelerated.
    “While labor demand may still be high, labor supply may be struggling to keep pace,” Bunker said. Nevertheless, the report should alleviate short-term recession fears, he said.
    “If there’s any surprise emerging in this report, it’s that the labor market might have more momentum than previously thought,” he said.
    The public sector led the way last month with 52,000 jobs, overwhelmingly in local government, according to the Bureau of Labor Statistics.

    Health care also saw solid growth with nearly 38,000 jobs added, primarily in ambulatory care and hospitals. Job growth was strong in the sector throughout 2023, adding 55,000 positions a month on average compared with monthly gains of 46,000 in 2022.
    Social assistance positions rose by 21,000 in December, with jobs gains averaging 22,000 per month in 2023, slightly more than the 19,000 average monthly increase in 2022.
    The leisure and hospitality industry was little changed in December, adding 40,000 positions, with employment in the sector remaining below its pre-pandemic level by 1%, according to the Bureau of Labor Statistics.
    The retail sector added 17,000 jobs to end the year, also little changed, with gains offset by a loss of 13,000 positions in department stores. Employment in the industry has struggled to gain speed since recovering from pandemic losses in 2022, according to the data.
    Construction also trended upward with 17,000 new positions in December. The sector saw monthly gains of 16,000 in 2023 on average, compared with 22,000 in 2022.
    Employment was little changed last month in mining, oil and gas, manufacturing, wholesale trade, information, financial activities, and other services, according to the Bureau of Labor Statistics.
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