AP Photo/Susan Walsh

The employment report out Friday flew past economist expectations.

That contrasted with recent talk of an imminent downturn.

Now, questions have emerged surrounding whether concerns about the economy are overdone.

Eyeing a burgeoning labor market, some are rethinking warnings of an imminent downturn.

The December employment report out Friday showed the US added the most jobs since February and that wage gains accelerated at their fastest pace since 2009, raising questions on whether concerns about the economy have been overdone.

"The far bigger than expected 312,000 jump in non-farm payrolls in December would seem to make a mockery of market fears of an impending recession,” Paul Ashworth, chief economist at Capital Economics, said in an email.

A flurry of concerns, including an ongoing trade war, fading stimulus and rising interest rates, have led to a blustery few months in financial markets and unnerved officials from Wall Street to Washington. In December, more than half of economists surveyed by The Wall Street Journal predicted a recession would begin within the next two years.

"I would prepare for it," Sheila Bair, who served as head of the Federal Deposit Insurance Corporation during the 2008 financial crisis, recently said of a downturn. "Economic ups and downs are a part of the market-based system."

But with wage growth and the labor force participation rate moving higher, there may be more slack in the economy than had been previously thought, according to Principal Global Investors chief economist Bob Baur.

"This is an astounding report," he said. "If there's a bubble somewhere, it's in the talk of a recession."

President Donald Trump, who has repeatedly attempted to discredit official Labor Department data in the past, celebrated the employment figures with an all-caps tweet. His administration also seized on the report, with White House Economic advisor Larry Kudlow saying on Bloomberg TV "there's no recession in sight."

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Still, the outlook for the US economy remains murky, especially in wake of sharply lower consumer confidence and manufacturing figures out this week. While the jobs report signals current and past business conditions, according to economists, factory-activity indicators tend to point to future performance.

Strong employment numbers have preceded downturns before. As Nick Timiraos of The Wall Street Journal pointed out Friday morning, the US economy added a robust 467,000 jobs just one year before the 2001 recession began.

In any event, market watchers will be closely monitoring what booming employment could mean for monetary policy. Federal Reserve Chairman Jerome Powell signaled on Friday the central bank sees a flexible rate path this year, saying that "wages going up is not necessarily inflationary."

But officials will keep an eye on recent manufacturing figures that were "well below expectation," he added while speaking at an economics conference in Atlanta.

Other economic indicators could offer more clarity in coming months, though key data is currently unavailable due to a partial shutdown of the federal government. While the Department of Labor is funded through September, other agencies like the Department of Commerce are unable to operate.

"We clearly need more data to get a better sense of how things are shaking out across the U.S. economy," said Josh Wright, chief economist at iCIMS Inc., reacting to the employment report. "Too bad the partial government shutdown will reduce our data flow."

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