Strong US jobs, wages growth expected in December

WASHINGTON (Reuters) - The U.S. economy likely maintained a solid pace of job and wage growth in December, but rising borrowing costs as the Federal Reserve fights inflation could slow labor market momentum significantly by mid-year.

The Labor Department s closely watched employment report on Friday is also expected to show the unemployment rate unchanged at 3.7% last month. The labor market has remained strong since the Fed embarked last March on its fastest interest rate-hiking since the 1980s.

Rate-sensitive industries like housing and finance, as well as technology companies, including Twitter, Amazon (AMZN.O) and Facebook parent Meta (META.O) have slashed jobs, yet airlines, hotels, restaurants and bars are desperate for workers as the leisure and hospitality industries continue to recover from the pandemic.

Labor market resilience has underpinned the economy by sustaining consumer spending, but could prompt the Fed to lift its target interest rate above the 5.1% peak the U.S. central bank projected last month and keep it there for a while.

"All indications are that the labor market remains strong," said Sung Won Sohn, a finance and economics professor at

Loyola Marymount University in Los Angeles. "Leisure and hospitality employers are not able to get anybody even after wages have been going up. That pattern has and will continue for a while, so that s where the rubber hits the road."

The survey of business establishments is likely to show that nonfarm payrolls increased by 200,000 jobs last month after rising 263,000 in November, according to a Reuters poll of economists. That would be the smallest gain in two years.

However, job growth would far exceed the pace needed to keep up with growth in the working-age population, comfortably in the 150,000-300,000 range that economists associate with tight labor markets.

Estimates ranged from as low as 130,000 to as high as the 350,000 predicted by TD Securities.

Data from payroll scheduling and tracking company Homebase showed employers held on to workers in December, which suggested a smaller-than-normal drop in not seasonally adjusted (NSA) terms.