The U.S. economy slowed in the fourth quarter but still turned in a healthy 2.8% growth rate for the year, compared to 2.9% in 2023. Growth in 2024’s GDP reflected increases in consumer spending, investment, government spending and exports.

The fourth quarter expanded at an annualized rate of 2.3%, as measured by gross domestic product. That was off from the 3.1% GDP increase in the third quarter and slightly below the expectations of many economists who predicted a 2.4% gain. “Fourth-quarter GDP data capped off a surprisingly strong year in 2024. The U.S. consumer has been unstoppable, supported by wealth creation, a strong labor market and lending,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

There are few concerns about economic growth this year. The key uncertainty lies in whether proposed tariffs and expansionist policies by the new administration in Washington, D.C., will fan the embers of inflation, burden consumers with higher prices and prevent the Federal Reserve from lowering interest rates. The increase in real GDP in the fourth quarter primarily reflected increases in consumer and government spending that were partly offset by a decrease in investment. Spending on imports, a subtraction in the calculation of GDP, fell 0.8% from 10.7% in Q3, the biggest drop in six quarters. READ MORE >

The U.S. economy delivered a strong finish to 2024, adding 256,000 jobs in December for the largest increase since March. November 2024’s job gains were revised down by 15,000 to 212,000, while 7,000 added jobs in October raised the month’s revised total to 43,000.

The increase was greater than the Dow Jones consensus forecast of 155,000 jobs. The unemployment rate unexpectedly ticked down to 4.1% from 4.2%.

Notably, wage growth does not appear to be re-accelerating. Year-over-year wage growth for the private sector came in at 3.9%, roughly where it has been for three consecutive months. These and other key factors show the economy is operating at strength. There were about 2.2 million jobs added in 2024, a monthly average of 186,000 in line with annual totals from 2017 to 2019.

Job growth came from the familiar sources of health care, which gained 46,000 positions, followed by 43,000 leisure and hospitality jobs and 33,000 added to government payrolls.

Retail trade added 43,000 jobs in December, following a loss of 29,000 jobs in November. In December, employment increased in clothing, clothing accessories, shoe, and jewelry retailers (+23,000); general merchandise retailers (+13,000); and health and personal care retailers (+7,000). Building material and garden equipment and supplies dealers lost jobs (-11,000). Overall, employment in retail trade changed little in 2024, following an average monthly increase of 10,000 in 2023. At their December meeting, Federal Reserve officials deemed the labor market mostly healthy though slowing. The Fed voted at the meeting to lower its key borrowing rate by a quarter percentage point while signaling a slower pace of reductions ahead. “The bottom line is the economy is in a good place. But, as markets expected, central bankers left rates unchanged in their January Meeting. It’s growing very strongly. The labor market is at full employment,” said St. Louis Fed President Alberto Musalem in an interview after the jobs report. Musalem also cautioned that the pace of the interest rate reductions “has to be patient and careful and very dependent on the outlook.” READ MORE>

After cutting the federal funds target interest rate by a half point in September the Fed’s Open Market Committee lowered the overnight bank rate another 50 basis points in the fourth quarter to 4.25% to 4.50%. But policymakers signaled that lingering inflation and strong economy have forced a recalibration of rate-cut plans for 2025, scaling back the number of planned reductions from four to two.

“Recent indicators suggest that economic activity has continued to expand at a solid pace,” said Fed Chair Jerome Powell after the December meeting, telling the New York Times: “The U.S. economy is just performing very, very well, substantially better than our global peer group.”

Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low, Powell said. Inflation has made progress but remains somewhat elevated. Powell said the central bank’s policy “is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate.”

The Fed held rates at 5.25% to 5.50% from July 2023 to September 2024. Between March 2022, when rates were near zero, and July 2023 the Fed raised rates 11 times. READ MORE >