In this edition of our Race, Jobs and the Economy series decoding each month’s Bureau of Labor Statistics (BLS) monthly jobs report, we overview the current state of the labor market and discuss the economic plans of the incoming Trump administration.
Analysis of Topline Figures in the January 2025 BLS Report
The economy added 256,000 jobs in December, a hardy showing to close out 2024. The unemployment rate inched down to 4.1%.
The biggest industry gainers were health care (+46,000), leisure and hospitality (+43,000), retail (+43,000) and government (+33,000). The private sector ended the year with 138,000 jobs added, a welcoming sign following months of decline. The private sector diffusion index was above 50, indicating that a majority of industries gained jobs rather than stagnating or losing jobs.
In November, the Black unemployment rate reached its highest level since early 2022 at 6.4%. In December, the unemployment rate of Black men and women declined to 5.6% and 5.4%, respectively. Despite these sub-6% rates, the overall Black unemployment rate receded to 6.1% in December, partly due to the nearly 20% Black youth jobless rate. The Hispanic unemployment rate ended the year at roughly the same point it started at (5.1%).
For the first time since the spring of 2022, job openings have risen for two consecutive months (October and November of last year). With the stabilization of hires and resignations, the labor market is showing signs of growth as we start the new year. Additionally, the job growth is broad-based and seems to be in high-paying industries like finance and professional services.
Holiday Shopping
One way to gauge the strength of the economy is by analyzing the spending trends of consumers during the holiday season. The Washington Post reported that during the shopping seasons consumers were price-conscious and the lingering effects of inflation were dampening their outlook on spending. This was particularly the case for low- and moderate-income households who are more focused on basic necessities than in previous holiday seasons.
Despite these fears, consumer spending was robust this holiday season. According to Adobe, online spending from November 1 to December 31 was up 8.7% year-over-year, reaching $241 billion. While inflation has made consumers more price-conscious, e-commerce prices have fallen for over two years straight. Because of this, experts have concluded that increased holiday spending was due mainly to higher demand and not lower prices, a welcome sign for an economy battered by inflation.
Visa reported that total holiday spending increased by 4.8% year-over-year. Consumers relied more on deals and promotions according to Mastercard data, indicating an increased sensitivity to prices, even as Americans spent more overall during the holiday seasons.
The strong spending numbers give credence to the idea that the consumer is solid. While the numbers are promising, one aspect raises concerns: an explosion in the usage of “Buy Now-Pay Later” (BNPL) services. These fintech products allow consumers to access short-term, interest-free (if repayment occurs on schedule) credit for retail purchases. Usage during the holiday season increased by 10%. However, in the last two years usage nationally has increased by 40%.
Consumers who use BNPL services are more likely to have filed for bankruptcy during the previous year and reported lower amounts of liquid assets. The greatest predictor of BNPL usage is a person’s credit score. 23% of those with credit scores below 600 reported using BNPL services versus only 3% of those with credit scores above 800. Presently, only 9% of consumers use BNPL services. However, that usage continues to rise, indicating a vulnerability for low-income households.
While consumer spending will be a closely watched metric as we advance through 2025, the mortgage and housing market will continue to garner well-deserved attention. Recently, the interest rate on a 30-year fixed-rate mortgage increased to 6.93%, the highest level since July 2024. Mortgage rates tend to rise and fall in tandem with yields on government bonds, which have jumped partly due to potentially inflationary proposals from the incoming Trump administration.
Households will continue to be squeezed by inflation on the consumer side and high mortgage rates on the investment side. Though mortgage rates and interest rates in general are still expected to decline this year, the unpredictability of the incoming administration along with rising household debt defaults make this expectation dubious. Additionally, household credit card balances increased 8.1% in the third quarter of 2024, indicating a deepening dependence on debt-fueled consumption.
Black unemployment will be a key indicator to watch if the new administration carries through on their threats of large-scale tariffs and deportations. As with previous recessions and economic downturns, the expected impact of those policies could first be seen in dramatic spikes in Black unemployment rates.
Joseph Dean is NCRC’s Junior Racial Economic Research Specialist.
Photo by Roger Marks via Flickr.
