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Brisk Wage Gains in December Could Keep the Fed Watchful

But the latest evidence on the labor market could give officials a fresh reason to be cautious before declaring victory. Friday’s jobs report suggested that the economy retained a surprising amount of momentum at the end of 2023. In particular, average hourly earnings climbed 0.4 percent from the previous month, and 4.1 percent compared to a year earlier. That was faster than the 3.9 percent expectation in a Bloomberg survey of economists.

Jerome H. Powell, the Fed chair, suggested last month that wage gains at their recent pace — up about 4 percent from a year earlier — were probably still slightly hotter than what is consistent with slow and steady inflation. If employers are paying workers more, they may try to raise prices to cover those higher labor costs, keeping inflation chugging.

But Mr. Powell noted that wage gains had “been gradually cooling off.” The fresh uptick is just one data point, but if it persists, it could call that trend into question.

Fed officials had also been taking heart in a recent slowdown in job gains, one that Friday’s report cut against. Employers added 216,000 jobs in December, more than economists had predicted, and the unemployment rate remained low.

Even so, other signs have continued to suggest that the job market is cooling somewhat: Job openings have been coming down, and employers themselves often report less stress when it comes to recruiting.


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