The U.S. labor market capped off 2023 on a high note, with the final monthly jobs report of the year dampening thoughts that an interest rate cut by the Federal Reserve is coming soon. 

Employers added 216,000 jobs in the final month of the year, with the larger-than-expected gain exceeding November's increase of 173,000, and topping forecasts of 160,000 by economists polled by Factset.

The unemployment rate held steady at 3.7%, and wages were up 0.4% in December from November and ahead 4.1% from a year ago, the Labor Department reported on Friday.

"Overall, 2023 was a remarkable year for the job market in that the economy dodged a widely anticipated recession, despite 500 basis points of interest rate increases in 2022 and 2023," Julia Pollak, chief economist at ZipRecruiter, wrote in emailed comments. 

Payrolls employment rose by 2.7 million last year, making for an average monthly gain of 225,000. That's below the 4.8 million increase in 2022, a year that included monthly gains of 399,000, the government said.

The monthly report could shift thinking that the Federal Reserve might start cutting interest rates as soon as March.

"The labor market remains strong, and the economy continues to create jobs at a robust pace," Rubeela Farooqi, chief economist at High Frequency Economics, wrote in a report. "For Fed officials, these data – especially the uptick in wages - support the view that the policy rate needs to remain restrictive for some time. But we continue to think that rates are at a peak and the Fed's next move will be a rate cut, likely by the middle of next year," the economist added.

U.S. stocks posted modest gains at the start. 

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.

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