President Joe Biden is set to end his term with a relatively strong labor market, as the U.S. added a surprising 256,000 jobs in December, and the unemployment rate dropped to 4.1%. These figures, reported by the Bureau of Labor Statistics on Friday, outperformed Wall Street expectations. Analysts had predicted only 155,000 new jobs and for the unemployment rate to remain at 4.2%.

These numbers suggest that the U.S. economy has largely achieved the "soft landing" that Biden had aimed for: low unemployment and controlled inflation. While layoffs remain low, the pace of hiring has slowed significantly over the past year. New job creation is mainly concentrated in healthcare, government, and retail trade, while other sectors have seen little growth. The BLS noted that there were minimal job gains in manufacturing, professional services, leisure and hospitality, and construction in December.

Despite efforts to bring back blue-collar jobs, the manufacturing sector shed jobs in four of the last five months, ending the year down by 87,000 jobs. The U.S. manufacturing workforce stands at 12.9 million, roughly the same size it was when the COVID-19 pandemic began.

Markets reacted to the report by driving up borrowing costs, with traders now predicting only one Federal Reserve interest rate cut in 2025. Stocks fell, erasing earlier gains tied to Donald Trump's reelection bid.

Many voters chose Trump in response to dissatisfaction with the economy under Biden, particularly concerning inflation that surged after Biden took office in 2021. While inflation has dropped, it remains above the Fed's 2% target. This persistent price pressure has overshadowed a strong labor market and wage growth, which improved household purchasing power. Unemployment reached record lows, and job gains continued steadily as the economy recovered from the pandemic.

Despite overall wage gains outpacing inflation and the stock market performing well, many consumers feel financially strained due to higher costs, contributing to the Democrats' loss of both the White House and the Senate.

Looking ahead, experts predict moderate job growth as economic activity stabilizes and interest rates gradually decrease following the Fed's monetary easing. The BLS also reported an increase in job openings this week, with ZipRecruiter Chief Economist Julia Pollak noting that this suggests the potential for stronger hiring as 2025 progresses. Small-business openings have been rising, driven by optimism about Trump's economic policies.

Recent consumer credit data shows that Americans are trying to reduce their debt after a period of increased spending, indicating slower consumption. However, borrowing for auto purchases spiked in November, painting a more balanced picture of consumer financial health.

S&P Global also reported that its business confidence index hit an 18-month high, with the employment component rising for the first time in five months. Guy Berger, director of economic research at the Burning Glass Institute, said that a combination of factors will likely lead to a stabilization in the labor market, with a possible slight warming in the months ahead.